Monetary policy, indeterminacy and learning

Forward-looking monetary models with Taylor-type interest rate rules are known to generate indeterminacies, with a potential dependence on extraneous 'sunspots,' for some structural and policy parameters. We investigate the stability of these solutions under adaptive learning, focusing on 'common factor' or 'resonance frequency' representations in which the observed sunspot has a suitable time-series structure. We consider specifications incorporating both lagged and expected inflation in the Phillips Curve, and both expected and inertial elements in the policy rule. We find that some policy rules can indeed lead to learnable sunspot solutions and we investigate the conditions under which this phenomenon arises.