European Business Schools Librarian's Group
Department of Economics Working Papers,
Vienna University of Economics and Business, Department of Economics
Social learning expectations: microfoundations and a Dynare toolbox
Alex Grimaud (), Isabelle Salle () and Gauthier Vermandel ()
Additional contact information
Alex Grimaud: Department of Economics, Vienna University of Economics and Business
Isabelle Salle: Department of Economics, University of Ottawa
Gauthier Vermandel: Ecole Polytechnique UMR 7641
Abstract: Social learning (SL) is a behavioral model in which expectations and the resulting aggregate dynamics stem from the interactions of a large amount of heterogeneous agents. Nonetheless, this framework has so far lacked micro-foundations and a general-solution method. This paper bridges these two gaps with: (i) a micro-founded New Keynesian model with social learning expectations; (ii) a general solution method that we implement in a Dynare toolbox that solves any linear state-space model with SL expectations. The resulting framework provides a self-contained tool to contrast policy analysis under SL and rational expectations. As an illustration, optimal monetary policy rules are studied under the two expectation regimes.
Keywords: Inflation targeting, Monetary policy, Heterogeneous expectations
JEL-codes: E32; E52; E58; E71 July 2023
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