Robust Learning Stability With Operational Monetary Policy Rules

The authors consider the robust stability of a rational expectations equilibrium, which they define as stability under discounted (constant gain) least-squares learning, for a range of gain parameters. They find that for operational forms of policy rules, i.e. rules that do not depend on contemporaneous values of endogenous aggregate variables, many interest-rate rules do not exhibit robust stability. They consider a variety of interest-rate rules, including instrument rules, optimal reaction functions under discretion or commitment, and rules that approximate optimal policy under commitment.