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dc.contributor.authorOrphanides, Athanasiosen_US
dc.contributor.authorWilliams, John C.en_US
dc.date.accessioned2006-07-31en_US
dc.date.accessioned2009-07-24T13:47:18Z-
dc.date.available2009-07-24T13:47:18Z-
dc.date.issued2003en_US
dc.identifier.piurn:nbn:de:hebis:30-10458-
dc.identifier.urihttp://hdl.handle.net/10419/25428-
dc.description.abstractThis paper investigates the role that imperfect knowledge about the structure of the economy plays in the formation of expectations, macroeconomic dynamics, and the efficient formulation of monetary policy. Economic agents rely on an adaptive learning technology to form expectations and to update continuously their beliefs regarding the dynamic structure of the economy based on incoming data. The process of perpetual learning introduces an additional layer of dynamic interaction between monetary policy and economic outcomes. We find that policies that would be efficient under rational expectations can perform poorly when knowledge is imperfect. In particular, policies that fail to maintain tight control over inflation are prone to episodes in which the public’s expectations of inflation become uncoupled from the policy objective and stagflation results, in a pattern similar to that experienced in the United States during the 1970s. Our results highlight the value of effective communication of a central bank’s inflation objective and of continued vigilance against inflation in anchoring inflation expectations and fostering macroeconomic stability.en_US
dc.language.isoengen_US
dc.publisherCenter for Financial Studies Frankfurt, Mainen_US
dc.relation.ispartofseriesCFS Working Paper 2003/40en_US
dc.subject.jelE52en_US
dc.subject.ddc330en_US
dc.subject.keywordImperfect Knowledgeen_US
dc.subject.keywordInflation Expectationsen_US
dc.subject.keywordMonetary Policyen_US
dc.subject.stwInflationserwartungen_US
dc.subject.stwGeldpolitiken_US
dc.subject.stwLernprozessen_US
dc.subject.stwInflation Targetingen_US
dc.subject.stwUnvollkommene Informationen_US
dc.subject.stwRationale Erwartungen_US
dc.subject.stwTheorieen_US
dc.titleImperfect knowledge, inflation expectations, and monetary policyen_US
dc.typeWorking Paperen_US
dc.identifier.ppn515125008en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
dc.identifier.repecRePEc:zbw:cfswop:200340-
Appears in Collections:CFS Working Paper Series, Universität Frankfurt a. M.

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