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Working Paper

Learning and the Central Bank

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.

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