Expectations about the future are central for determination of current macroeconomic outcomes and the formulation of monetary policy. Recent literature has explored ways for supplementing the benchmark of rational expectations with explicit models of expectations formation that rely on...

In this paper we consider inflation and government debt dynamics when monetary policy employs a global interest rate rule and private agents' forecasts using adaptive learning. Because of the zero lower bound on interest rates, active interest rate rules are known to imply the existence of a...

We review the recent work on interest rate setting, which emphasizes the desirability of designing policy to ensure stability under private agent learning. Appropriately designed expectations based rules can yield optimal rational expectations equilibria that are both determinate and stable...