Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/146681
Authors: 
Eusepi, Stefano
Preston, Bruce
Year of Publication: 
2016
Series/Report no.: 
Staff Report, Federal Reserve Bank of New York 782
Abstract: 
New Keynesian theory identifies a set of principles central to the design and implementation of monetary policy. These principles rely on the ability of a central bank to manage expectations precisely, with policy prescriptions typically derived under the assumption of perfect information and full rationality. However, the challenging macroeconomic environment bequeathed by the financial crisis has led many to question the efficacy of monetary policy, and, particularly, to question whether central banks can influence expectations with as much control as previously thought. In this paper, we survey the literature on monetary policy design under imperfect knowledge and asses to what degree its policy prescriptions deviate from the rational expectations benchmark.
Subjects: 
monetary policy
expectations formation
learning
JEL: 
E31
E32
E52
Document Type: 
Working Paper

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