We report the results of an experimental analysis of monetary policy decision-making under uncertainty. We used a large sample of economically literate undergraduate and postgraduate students from the London School of Economics to play a simple monetary policy game, both as individuals and in...

Using laboratory experiments within a New Keynesian framework, we explore the interaction between the formation of inflation expectations and monetary policy design. The central question in this paper is how to design monetary policy when expectations formation is not perfectly rational....