The rational expectations hypothesis is a bedrock of modern macroeconomics. It is often
combined with a strong, complementary hypothesis that all data about the state of the …

Traditional decision theory assumes that people respond to the exact features of the options
available to them, but observed behavior seems much less precise. This review considers …

This paper analyzes how bounded rationality affects monetary and fiscal policy via an
empirically relevant enrichment of the New Keynesian model. It models agents' partial …

Several academics and practitioners have pointed out that inflation follows a seemingly
exogenous statistical process, unrelated to the output gap, leading some to argue that the …

How does the economy respond to news about future policies or future fundamentals?
Standard practice assumes that agents have common knowledge of such news and face no …

ABSTRACT We estimate a Heterogeneous-Agent New Keynesian model with sticky
household expectations that matches existing microeconomic evidence on marginal …

We ask how fiscal deficits are financed in environments with two key features:(i) nominal
rigidity, and (ii) a violation of Ricardian equivalence due to finite lives or liquidity constraints …

We document that the expectations of households, firms, and professional forecasters in
standard surveys simultaneously extrapolate from recent events and underreact to new …

We show that in a broad class of menu cost models, the first-order dynamics of aggregate
inflation in response to arbitrary shocks to aggregate costs are nearly the same as in Calvo …

For many benchmark predictor variables, short‐horizon return predictability in the US stock
market is local in time as short periods with significant predictability (“pockets”) are …