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Social Learning and Monetary Policy Rules*
Version of Record online: 6 JUN 2012
© 2012 The Author(s). The Economic Journal © 2012 Royal Economic Society
The Economic Journal
Volume 123, Issue 567, pages 38–76, March 2013
How to Cite
Arifovic, J., Bullard, J. and Kostyshyna, O. (2013), Social Learning and Monetary Policy Rules. The Economic Journal, 123: 38–76. doi: 10.1111/j.1468-0297.2012.02525.x
Corresponding author: Jasmina Arifovic, Department of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 1S6, Canada. Email: firstname.lastname@example.org.
We thank Bruce McGough for helpful discussion and we thank two anonymous referees for helpful comments.
- Issue online: 26 FEB 2013
- Version of Record online: 6 JUN 2012
- Accepted manuscript online: 28 FEB 2012 12:56PM EST
- Submitted: 24 January 2008 Accepted: 3 October 2011
We analyse the effects of social learning in a monetary policy context. Social learning might be viewed as more descriptive of actual learning behaviour in complex market economies. In our model, Taylor Principle governs uniqueness and expectational stability of rational expectations equilibrium (REE) under homogeneous recursive algorithms. We find that the Taylor Principle is not necessary for convergence to REE minimum state variable (MSV) equilibrium under social learning. Sunspot equilibria exist in the indeterminate region. Our agents cannot co-ordinate on a sunspot equilibrium in general form specification, however, they can co-ordinate on common factor specification. We contribute to the use of genetic algorithm learning in stochastic environments.