Open Access
Expectations and fluctuations : the role of monetary policy
Loading...
Files
MWP_Rousakis_2013_18.pdf (625.33 KB)
Full-text in Open Access
License
Access Rights
Cadmus Permanent Link
Full-text via DOI
ISBN
ISSN
1830-7728
Issue Date
Type of Publication
LC Subject Heading
Other Topic(s)
EUI Research Cluster(s)
Initial version
Published version
Succeeding version
Preceding version
Published version part
Earlier different version
Initial format
Author(s)
Citation
EUI MWP; 2013/18
Cite
ROUSAKIS, Michael, Expectations and fluctuations : the role of monetary policy, EUI MWP, 2013/18 - https://hdl.handle.net/1814/27608
Abstract
This paper reconsiders the effects of expectations on economic uctuations. It does so within a competitive monetary economy which features producers and consumers with heterogeneous information about productivity. Agents' expectations are coordinated by a noisy public signal which generates non-fundamental, purely expectational shocks. I show that, depending on how monetary policy is pursued, purely expectational shocks can resemble either demand shocks, as conventionally thought, or supply shocks?increasing output and employment yet lowering ination. On the policy front, conventional policy recommendations are overturned: ination stabilization is suboptimal, whereas output-gap stabilization is optimal.