Ciência-IUL
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Publication Detailed Description
Journal Title
Studies in Nonlinear Dynamics and Econometrics
Year (definitive publication)
2010
Language
English
Country
Germany
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Abstract
Sticky information monetary models have been used in the macroeconomic literature to explain some of the observed features regarding inflation dynamics. In this paper, we explore the consequences of relaxing the rational expectations assumption usually taken in this type of model; in particular, by considering expectations formed through adaptive learning, it is possible to arrive to results other than the trivial convergence to a fixed point long-term equilibrium. The results involve the possibility of endogenous cyclical motion (periodic and a-periodic), which emerges essentially in scenarios of hyperinflation. In low inflation settings, the introduction of learning implies a less severe impact of monetary shocks that, nevertheless, tend to last for additional time periods relative to the pure perfect foresight setup
Acknowledgements
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Keywords
Fields of Science and Technology Classification
- Mathematics - Natural Sciences
- Economics and Business - Social Sciences
- Other Social Sciences - Social Sciences