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Interest rate rules and macroeconomic stability under heterogeneous expectations

Anufriev, Mikhail; Assenza, Tiziana; Hommes, Cars H.; … - 2009

of monetary policy. We use a stylized macro model of Howitt (1992) to investigate inflation dynamics under alternative … interest rate in response to inflation. In particular, if the monetary authority only responds weakly to inflation, a … cumulative process with rising inflation is likely. On the other hand, a Taylor interest rate rule that sets the interest rate …

Persistent link: https://www.econbiz.de/10011378358

Managing unanchored, heterogeneous expectations and liquidity traps

Hommes, Cars H.; Lustenhouwer, Joep - 2017

determining whether the economy can recover from the liquidity trap. Furthermore, a higher inflation target reduces the …

Persistent link: https://www.econbiz.de/10011770686

Expectations, Deflation Traps and Macroeconomic Policy

Honkapohja, Seppo - 2009

We examine global economic dynamics under infinite-horizon learning in a New Keynesian model in which the interest-rate rule is subject to the zero lower bound. As in Evans, Guse and Honkapohja, European Economic Review (2008), we find that under normal monetary and fiscal policy the intended...

Persistent link: https://www.econbiz.de/10013153604

A Model of Near-Rational Exuberance

Bullard, James; Evans, George W.; Honkapohja, Seppo - 2008

We study how the use of judgment or "add-factors" in forecasting may disturb the set of equilibrium outcomes when agents learn using recursive methods. We isolate conditions under which new phenomena, which we call exuberance equilibria, can exist in a standard self-referential environment....

Persistent link: https://www.econbiz.de/10014052421

Interest Rate Rules and Macroeconomic Stability under Heterogeneous Expectations

Anufriev, Mikhail - 2012

of monetary policy. We use a simple frictionless DSGE model to investigate inflation dynamics under alternative interest … the monetary authority sets the nominal interest rate in response to inflation. In particular, if the monetary authority … only responds weakly to inflation, a cumulative process with rising inflation is likely. On the other hand, a Taylor …

Persistent link: https://www.econbiz.de/10013117071

Liquidity Traps and Expectation Dynamics : Fiscal Stimulus or Fiscal Austerity?

Benhabib, Jess - 2012

We examine global dynamics under infinite-horizon learning in New Keynesian models where the interest-rate rule is subject to the zero lower bound. As in Evans, Guse and Honkapohja (2008), the intended steady state is locally but not globally stable. Unstable deflationary paths emerge after...

Persistent link: https://www.econbiz.de/10013098183