Abstract
In a small-open economy model with nominal wage and price rigidities, it has been argued that, in terms of welfare losses, the monetary policy rule that responds to consumer price index (CPI) inflation performs better than rules that react to competing inflation measures. From the viewpoint of determinacy and learnability of rational expectations equilibrium (REE), this paper suggests that the rule that responds to CPI inflation does not increase the Central Bank's ability to promote the convergence of an economy to a determinate and learnable REE nor improves the speed of this convergence when compared with rules that react to contending inflation measures.
Published Version
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