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Policy interaction, expectations and the liquidity trap

Evans, George W.; Honkapohja, Seppo - EconWPA - 2004

In this paper we consider inflation and government debt dynamics when monetary policy employs a global interest rate … interest rate rules are known to imply the existence of a second, low inflation steady state, below the target inflation rate … this low inflation steady state and is driven to an even lower inflation floor which, in turn, is supported by a switch to …

Persistent link: https://www.econbiz.de/10005561331

Adaptive learning and monetary policy design

Evans, George W.; Honkapohja, Seppo - EconWPA - 2004

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...

Persistent link: https://www.econbiz.de/10005561354

Friedman’s money supply rule vs optimal interest rate policy

Evans, George W.; Honkapohja, Seppo - EconWPA - 2004

Using New Keynesian models, we compare Friedman’s k-percent money supply rule to optimal interest rate setting, with respect to determinacy, stability under learning and optimality. We first review the recent literature. Open-loop interest rate rules are subject to indeterminacy and...

Persistent link: https://www.econbiz.de/10005126422

Liquidity Traps, Learning and Stagnation

Evans, George W.; Guse, Eran; Honkapohja, Seppo - C.E.P.R. Discussion Papers - 2007

bound on inflation. In contrast, policies geared toward ensuring an output lower bound are insufficient for avoiding …

Persistent link: https://www.econbiz.de/10005497854

Robust Learning Stability with Operational Monetary Policy Rules

Evans, George W.; Honkapohja, Seppo - C.E.P.R. Discussion Papers - 2008

We consider "robust stability" of a rational expectations equilibrium, which we define as stability under discounted (constant gain) least-squares learning, for a range of gain parameters. We find that for operational forms of policy rules, i.e. rules that do not depend on contemporaneous values...

Persistent link: https://www.econbiz.de/10005498187

Adaptive Learning and Monetary Policy Design

Evans, George W.; Honkapohja, Seppo - Department of Economics, University of Oregon - 2002

We review the recent work on interest rate setting, which emphasizes the desireability 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...

Persistent link: https://www.econbiz.de/10005593736

Near-Rational Exuberance

Bullard, James; Evans, George W.; Honkapohja, Seppo - Department of Economics, University of Oregon - 2005

We study how the use of judgement or "add-factors" in macroeconomic 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 standard macroeconomic...

Persistent link: https://www.econbiz.de/10005593763

Friedman's Money Supply Rule versus Optimal Interest Rate Policy

Evans, George W.; Honkapohja, Seppo - Department of Economics, University of Oregon - 2003

Using New Keynesian models, we compare Friedman's k-percent money supply rule to optimal interest rate setting, with respect to determinacy, stability under learning and optimality. First we review the recent literature: open-loop interest rate rules are subject to indeterminacy and instability...

Persistent link: https://www.econbiz.de/10005593766

Monetary Policy, Judgment, and Near-Rational Exuberance

Bullard, James; Evans, George W.; Honkapohja, Seppo - In: American Economic Review 98 (2008) 3, pp. 1163-77

We study how the use of judgment or "add-factors" in macroeconomic forecasting may disturb the set of equilibrium outcomes when agents learn using recursive methods. We examine the possibility of a new phenomenon, which we call exuberance equilibria, in the New Keynesian monetary policy...

Persistent link: https://www.econbiz.de/10005573061

Expectations, Deflation Traps and Macroeconomic Policy

Evans, George W.; Honkapohja, Seppo - C.E.P.R. Discussion Papers - 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 (2008), we find that under normal monetary and fiscal policy the intended steady state is locally but...

Persistent link: https://www.econbiz.de/10005048553