We study a simple monetary model in which a central bank faces a boundedly rational private sector and has the goal of stabilizing inflation. The system’s dynamics is generated by the interaction of the expectations about inflation of the various agents involved. A modest degree of heterogeneity in such expectations is found to have interesting consequences, in particular when the central bank is uncertain about the relevant behavioral parameters. We find that a simple heuristic based on mean and variance of the distribution of behavioural parameters stabilizes the system for a wide parametric region.

Bounded rationality and parameters’ uncertainty in a simple monetary policy model / Domenico Colucci; Vincenzo Valori. - ELETTRONICO. - (2012).

Bounded rationality and parameters’ uncertainty in a simple monetary policy model

COLUCCI, DOMENICO;VALORI, VINCENZO
2012

Abstract

We study a simple monetary model in which a central bank faces a boundedly rational private sector and has the goal of stabilizing inflation. The system’s dynamics is generated by the interaction of the expectations about inflation of the various agents involved. A modest degree of heterogeneity in such expectations is found to have interesting consequences, in particular when the central bank is uncertain about the relevant behavioral parameters. We find that a simple heuristic based on mean and variance of the distribution of behavioural parameters stabilizes the system for a wide parametric region.
2012
Domenico Colucci; Vincenzo Valori
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Utilizza questo identificatore per citare o creare un link a questa risorsa: https://hdl.handle.net/2158/957751
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