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Working Paper

Learning and the Central Bank

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It is well known that sunspot equilibria may arise under an interest-rate operating procedure in which the central bank varies the nominal rate with movements in future inflation (a forward-looking Taylor rule). This paper demonstrates that these sunspot equilibria may be learnable in the sense of E-stability.
10.01.2001ISSN 2573-7953 WP 01-17DOI 10.26509/frbc-wp-200117
Keywords general equilibrium, money and interest rates, monetary policy
JEL Classification Codes D51, E42, E52

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

Suggested Citation

Carlstrom, Charles T., and Timothy S. Fuerst. 2001. “Learning and the Central Bank.” Federal Reserve Bank of Cleveland, Working Paper No. 01-17. https://doi.org/10.26509/frbc-wp-200117