We present a decision theoretic framework with agents that are learning about the behavior of market determined … about equilibrium prices, so that learning about price behavior, as in Adam, Marcet and Nicolini (2008), is fully consistent …

time separable preferences strongly improves empirical performance. Learning causes momentum and mean reversion of returns … restrict consideration to learning schemes that imply only small deviations from full rationality. The findings are robust to … the particular learning rule used and the value chosen for the single free parameter introduced by learning, provided …

models of expectations formation that rely on econometric learning. Some apparently natural policy rules turn out to imply … expectational instability of private agents' learning. We use the standard New Keynesian model to illustrate this problem and survey … learning. We then consider some practical concerns such as measurement errors in private expectations, observability of …

active learning possibilities has effects on the optimal interest rate rule followed by the central bank. For a wide range of …

. Learning about the transmission process of monetary policy is introduced by having heterogeneous agents - i.e. the central bank …. Here following Evans and Honkapohja (2001), the learning scheme we investigate is that of least-squares learning (recursive … OLS) using the Kalman filter. We find that optimal monetary policy under learning is a policy that separates estimation …