search query: @indexterm inflation policy / total: 17
reference: 7 / 17
Author: | Cho, I.-K. Williams, N. Sargent, T. J. |
Title: | Escaping Nash inflation |
Journal: | Review of Economic Studies
2002 : JAN, VOL. 69:1(238), p. 1-40 |
Index terms: | Inflation Inflation policy Statistical methods |
Language: | eng |
Abstract: | An ordinary differential equation (ODE) gives the mean dynamics that govern the convergence to self-confirming equilibria of self-referential systems under discounted least squares learning. Another ODE governs escape dynamics that recurrently propel away from a selfconfirming equilibrium. In a model with a unique self-confirming equilibrium, the escape dynamics make the government discover too strong a version of the natural rate hypothesis. The escape route dynamics cause recurrent outcomes close to the Ramsay inflation rate in a model with an adaptive government. |
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