Do survey data on inflation expectations contain useful information for estimating macroeconomic models? I address this question by using survey data in the New Keynesian model by Smets and Wouters (2007) to estimate and compare its performance when solved under the assumptions of Rational...

Do survey data on inflation expectations contain useful information for estimating macroeconomic models? I address this question by using survey data in the New Keynesian model by Smets and Wouters (2007) to estimate and compare its performance when solved under the assumptions of Rational...

We derive the optimal monetary policy in a sticky price model when private agents follow adaptive learning. We show that this slight departure from rationality has important implications for policy design. The central bank faces a new intertemporal trade-off, not present under rational...

Most studies of optimal monetary policy under learning rely on optimality conditions derived for the case when agents have rational expectations. In this paper, we derive optimal monetary policy in an economy where the Central Bank knows, and makes active use of, the learning algorithm agents...

The main advantage of price level stabilization compared with inflation stabilization rests on the central bank's ability to shape expectations. We show that stabilizing prices is no longer optimal when the central bank can shape expectations of agents with incomplete knowledge, who have to...

Does survey data contain useful information for estimating macroeconomic models? We address this question by using survey data of inflation expectations to estimate the New Keynesian model by Smets and Wouters (2007) and compare its performance under rational expectations and adaptive learning....