Adaptive Learning, Endogenous Inattention, and Changes in Monetary Policy

13 Pages Posted: 18 Oct 2007

See all articles by William Branch

William Branch

University of California, Irvine - Department of Economics

John B. Carlson

Federal Reserve Bank of Cleveland

George W. Evans

University of Oregon - Department of Economics; University of St. Andrews - School of Economics and Finance

Bruce McGough

Oregon State University - Department of Economics

Date Written: August 2006

Abstract

This paper develops an adaptive learning formulation of an extension to the Ball, Mankiw, and Reis (2005) sticky information model that incorporates endogenous inattention. We show that, following an exogenous increase in the policymaker's preferences for price vs. output stability, the learning process can converge to a new equilibrium in which both output and price volatility are lower.

Keywords: expectations, optimal monetary policy, bounded rationality, economic stability, adaptive learning

JEL Classification: E52, E31, D83, D84

Suggested Citation

Branch, William and Carlson, John B. and Evans, George W. and McGough, Bruce, Adaptive Learning, Endogenous Inattention, and Changes in Monetary Policy (August 2006). FRB of Cleveland Working Paper No. 06-10, Available at SSRN: https://ssrn.com/abstract=1022328 or http://dx.doi.org/10.2139/ssrn.1022328

William Branch

University of California, Irvine - Department of Economics ( email )

3151 Social Science Plaza
Irvine, CA 92697-5100
United States
757-221-2432 (Phone)

John B. Carlson (Contact Author)

Federal Reserve Bank of Cleveland ( email )

PO Box 6387
Cleveland, OH 44101-1387
United States

George W. Evans

University of Oregon - Department of Economics ( email )

1285 University of Oregon
Eugene, OR 97403
United States
541-346-4662 (Phone)
541-346-1243 (Fax)

University of St. Andrews - School of Economics and Finance ( email )

The Scores, Castlecliff
St. Andrews, Fife KY16 8RD
United Kingdom
44-1334-462435 (Phone)

HOME PAGE: http://www.st-andrews.ac.uk/economics/staff/pages.g.evans.shtml

Bruce McGough

Oregon State University - Department of Economics ( email )

303 Ballard Extension Hall
Corvallis, OR 97331
United States
541-737-2321 (Phone)
541-737-5917 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
69
Abstract Views
623
rank
445,971
PlumX Metrics