We present a model of monetary policy where the policymaker faces uncertainty about which he is learning in a Bayesian fashion. A fixed money supply rule is not optimal since the learning leads to adjustments in the monetary action. We present cases in which it is optimal to bear some cost in terms of current output performance in order to gain information that can be used in the formulation of future monetary policy: experimentation therefore pays. We also show that even passive learning without experimentation still leads to an activist monetary policy, i.e., one that is responsive to new information.

Learning, Experimentation and Monetary Policy / Bertocchi, Graziella; Spagat, M.. - In: JOURNAL OF MONETARY ECONOMICS. - ISSN 0304-3932. - STAMPA. - 32:(1993), pp. 169-183.

Learning, Experimentation and Monetary Policy

BERTOCCHI, Graziella;
1993

Abstract

We present a model of monetary policy where the policymaker faces uncertainty about which he is learning in a Bayesian fashion. A fixed money supply rule is not optimal since the learning leads to adjustments in the monetary action. We present cases in which it is optimal to bear some cost in terms of current output performance in order to gain information that can be used in the formulation of future monetary policy: experimentation therefore pays. We also show that even passive learning without experimentation still leads to an activist monetary policy, i.e., one that is responsive to new information.
1993
32
169
183
Learning, Experimentation and Monetary Policy / Bertocchi, Graziella; Spagat, M.. - In: JOURNAL OF MONETARY ECONOMICS. - ISSN 0304-3932. - STAMPA. - 32:(1993), pp. 169-183.
Bertocchi, Graziella; Spagat, M.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11380/449141
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