02124cas a2200253 a 4500 AALejournalIMF006952 230101c9999 xx r poo 0 0eng d 5.00 USD 9781455211777 1018-5941 BD-DhAAL BD-DhAAL Zanna, Luis-Felipe. Learning About Inflation Measures for Interest Rate Rules / Luis-Felipe Zanna, Marco Airaudo. Washington, D.C. : International Monetary Fund, 2010. 1 online resource (45 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Empirical evidence suggests that goods are highly heterogeneous with respect to the degree of price rigidity. We develop a DSGE model featuring heterogeneous nominal rigidities across two sectors to study the equilibrium determinacy and stability under adaptive learning for interest rate rules that respond to inflation measures differing in their degree of price stickiness. We find that rules responding to headline inflation measures that assign a positive weight to the inflation of the sector with low price stickiness are more prone to generate macroeconomic instability than rules that respond exclusively to the inflation of the sector with high price stickiness. By this we mean that they are more prone to induce non-learnable fundamental-driven equilibria, learnable self-fulfilling expectations equilibria, and equilibria where fluctuations are unbounded. We discuss how our results depend on the elasticity of substitution across goods, the degree of heterogeneity in price rigidity, as well as on the timing of the rule. Mode of access: Internet Airaudo, Marco. IMF Working Papers; Working Paper ; No. 2010/296 Full text available on IMF http://elibrary.imf.org/view/journals/001/2010/296/001.2010.issue-296-en.xml IMF e-Library