Near-rational exuberance
By: by James B. Bullard, George W. Evans and Seppo Honkapohja.
Contributors: Evans, George W., 1949-; Honkapohja, Seppo, 1951-
Series: Working paper ;; 2004-025A; Working paper (Federal Reserve Bank of St. Louis : Online) ;; 2004-025A.
Publisher: Federal Reserve Bank of St. Louis
Published: 2004
Place of publication: [St. Louis, Mo.]
Language: eng
Format: Electronic resource
Subjects: Macroeconomics.; Monetary policy.
Description: "We study how the use of judgement or "add-factors" in macroeconomic forecasting may disturb the set of equilibrium outcomes when agents learn using recursive methods.  We isolate conditions under which new phenomena, which we call exuberance equilibria, can exist in standard macroeconomic environments.  Examples include a simple asset pricing model and the New Keynesian monetary policy framework.  Inclusion of judgement in forecasts can lead to self-fulfilling fluctuations, but without the requirement that the underlying rational expectations equilibrium is locally indeterminate.  We suggest ways in which policymakers might avoid unintended outcomes by adjusting policy to minimize the risk of exuberance equilibria"--Federal Reserve Bank of St. Louis web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 10/27/2004.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.