Orphanides, Athanasios; Williams, John C. - In: Journal of the European Economic Association 4 (2006) 2-3, pp. 366-375
knowledge of the economy and continuously update their estimates of model parameters. We find that versions of the Taylor rule … calibrated to perform well under rational expectations with perfect knowledge perform very poorly when agents are learning and … interest rate is determined by the inflation rate and the change in the unemployment rate, perform well when knowledge is both …