Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/211933 
Year of Publication: 
2002
Series/Report no.: 
Bank of Finland Discussion Papers No. 29/2002
Publisher: 
Bank of Finland, Helsinki
Abstract: 
We review the recent work on interest rate setting, which emphasizes the desirability of designing policy to ensure stability under private agent learning.Appropriately designed expectations based rules can yield optimal rational expectations equilibria that are both determinate and stable under learning.Some simple instrument rules and approximate targeting rules also have these desirable properties.We take up various complications in implementing optimal policy, including the observability of key variables and the required knowledge of structural parameters.An additional issue that we take up concerns the implications of expectation shocks not arising from transitional learning effects.
Subjects: 
commitment
interest rate setting
adaptive learning
stability
determinacy
expectations shocks
JEL: 
E52
E31
D84
Persistent Identifier of the first edition: 
ISBN: 
952-462-021-9
Document Type: 
Working Paper

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