Kiel Working Papers, Kiel Institute for World Economics
No 1744:
Trend Growth and Learning About Monetary Policy Rules
Mewael Tesfaselassie
Abstract: The paper examines the effect of trend productivity growth
on the determinacy and learnability of equilibria under alternative
monetary policy rules. It shows that under a policy rule that responds to
current period inflation and the output gap a higher trend growth rate
relaxes the conditions for determinacy and learnability. Results are mixed
for other policy rules. Under the expectations-based rule, trend growth
reduces the scope for determinacy but it relaxes the conditions for
learnability. Under the lagged-data-based rule rule trend growth reduces
the scope for determinacy and learnability
Keywords: trend growth, learning, monetary policy, determinacy, expectational stability; (follow links to similar papers)
JEL-Codes: E4,; E5; (follow links to similar papers)
19 pages, November 2011
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