@article{d32cb58db1d5499ab6a904e9292c66dd,
title = "Escaping nash inflation",
abstract = "An ordinary differential equation (ODE) gives the mean dynamics that govern the convergence to self-confirming equilibria of self-referential systems under discounted least squares learning. Another ODE governs escape dynamics that recurrently propel away from a self-confirming equilibrium. In a model with a unique self-confirming equilibrium, the escape dynamics make the government discover too strong a version of the natural rate hypothesis. The escape route dynamics cause recurrent outcomes close to the Ramsey (commitment) inflation rate in a model with an adaptive government.",
author = "Cho, {In Koo} and Noah Williams and Sargent, {Thomas J.}",
note = "Funding Information: Acknowledgements. We thank Xiahong Chen, Amir Dembo, George Evans, Lars Peter Hansen, Michael Harrison, Seppo Honkapohja, Peter Howitt, Kenneth Judd, Robert King, David M. Kreps, and Eric Swanson for helpful discussions, and three anonymous referees for insightful criticisms that helped us to improve the substance and exposition of the paper. Chao Wei helped with the simulations. Cho and Sargent gratefully thank the National Science Foundation for Research support. Williams's research was supported by a fellowship in Applied Economics from the Social Science Research Council, with funds provided by the John D. and Catherine T. MacArthur Foundation. Sargent chose the order of authors' names to acknowledge Williams's special contributions in cracking difficult technical aspects of the problem.",
year = "2002",
doi = "10.1111/1467-937X.00196",
language = "English (US)",
volume = "69",
pages = "1--40",
journal = "Review of Economic Studies",
issn = "0034-6527",
publisher = "Oxford University Press",
number = "1",
}