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.
