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Journal of Economic Dynamics and Control
Article . 2009 . Peer-reviewed
License: Elsevier TDM
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Article . 2009
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Article . 2006 . Peer-reviewed
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Research . 2006
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Robustifying learnability

Authors: Robert Tetlow; P. Von zur Muehlen;

Robustifying learnability

Abstract

In recent years, the learnability of rational expectations equilibria (REE) and determinacy of economic structures have rightfully joined the usual performance criteria among the sought-after goals of policy design. Some contributions to the literature, including Bullard and Mitra (2001) and Evans and Honkapohja (2002), have made significant headway in establishing certain features of monetary policy rules that facilitate learning. However a treatment of policy design for learnability in worlds where agents have potentially misspecified their learning models has yet to surface. This paper provides such a treatment. We begin with the notion that because the profession has yet to settle on a consensus model of the economy, it is unreasonable to expect private agents to have collective rational expectations. We assume that agents have only an approximate understanding of the workings of the economy and that their learning the reduced forms of the economy is subject to potentially destabilizing perturbations. The issue is then whether a central bank can design policy to account for perturbations and still assure the learnability of the model. Our test case is the standard New Keynesian business cycle model. For different parameterizations of a given policy rule, we use structured singular value analysis (from robust control theory) to find the largest ranges of misspecifications that can be tolerated in a learning model without compromising convergence to an REE.

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Keywords

E-stability, learnability, Learning, monetary policy, robust control, Geldpolitik, Stabilität eines Gleichgewichts, E-stability, Learning and adaptive systems in artificial intelligence, monetary policy, monetary policy, learnability, indeterminacy, robust control, learnability, Macroeconomic theory (monetary models, models of taxation), Learning, C6, Sensitivity (robustness), E5, learning, ddc:330, Robust control ; Monetary policy, Rationale Erwartung, monetary policy, learning, E-stability, model uncertainty, robustness, Lernprozess, Theorie, robust control, jel: jel:E5, jel: jel:C6

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
9
Average
Average
Average
gold