Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
1139431 | Mathematics and Computers in Simulation | 2015 | 12 Pages |
Abstract
We study a simple monetary model in which a central bank faces a boundedly rational private sector and has the goal of stabilizing inflation. The system's dynamics is generated by the interaction of the expectations about inflation of the various agents involved. A modest degree of heterogeneity in such expectations is found to have interesting consequences, in particular when the central bank is uncertain about the relevant behavioral parameters. We find that a simple heuristic based on mean and variance of the distribution of behavioural parameters stabilizes the system for a wide parametric region.
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Authors
Domenico Colucci, Vincenzo Valori,