Anticipated disinflation and recession in the New Keynesian model under learning

- Under adaptive learning an anticipated disinflation causes a recession.
- This resolves the disinflationary-booms anomaly to the standard New Keynesian model.
- Agents' econometric model is based on the rational expectations equilibrium solution.

In the New Keynesian model under rational expectations a disinflation announced in advance causes an expansion. This anomaly is robust to the assumption that monetary policy follows a Taylor rule. I show that under adaptive learning an anticipated disinflation causes a recession. Thus learning offers a resolution to the disinflationary-booms anomaly.