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A well-known time-inconsistency problem hinders optimal decision-making when policymakers are constrained in their pesent choices by expectations of future outcomes.  The time-inconsistency problem is caused by differences in the preferences of policymakers who exist at different points in...
Persistent link: https://www.econbiz.de/10011277854
The welfare cost of random consumption fluctuations is known from De Santis (2007) to be increasing in the level of uninsured idiosyncratic consumption risk. It is known from Barillas, Hansen, and Sargent (2009) to increase if agents care about robustness to model misspecification. We calculate...
Persistent link: https://www.econbiz.de/10011240316
Persistent link: https://www.econbiz.de/10010826698
The welfare cost of random consumption fluctuations is known from De Santis (2007) to be increasing in the level of individual consumption risk in the economy. It is also known from Barillas et al. (2009) to increase if agents in the economy care about robustness to model misspecification. In...
Persistent link: https://www.econbiz.de/10010561143
Persistent link: https://www.econbiz.de/10010030491
In response to the Great Financial Crisis, the Federal Reserve, the Bank of England and many other central banks have adopted unconventional monetary policy instruments.  We investigate if one of these, purchases of long-term government debt, could be a valuable addition to conventional...
Persistent link: https://www.econbiz.de/10011004254
Saddlepath learning occurs when agents learn adaptively using a perceived law of motion that has the same form as the saddlepath relationship in rational expectations equilibrium.  Under saddlepath learning, we obtain a completely general relationship between determinacy and e-stability, and...
Persistent link: https://www.econbiz.de/10008673298
Why is inflation so much lower and at the same time more stable in developed economies in the 1990s, compared with the 1970s? This paper suggests that the United Kingdom, United States and other countries may have escaped from a volatile inflation equilibrium. Our argument builds on the story...
Persistent link: https://www.econbiz.de/10005504556
Persistent link: https://www.econbiz.de/10005425224
We introduce learning into a Hotelling model of a non-renewable resource market. By combining learning and scarcity we add significantly to the dynamics implied by learning and substantially enhance the volatility of commodity prices. In our learning model we show how a self confirming...
Persistent link: https://www.econbiz.de/10004973966