Two separate branches of research have shown the empirical benefits of nonlinearities in macroeconomic models and bounded rationality, respectively. This paper bridges these literatures by developing a methodology for estimating DSGE models when expectations are formed by adaptive learning...

This paper compares within-sample and out-of-sample fit of a DSGE model with rational expectations to a model with adaptive learning. The Galí, Smets and Wouters model is the chosen laboratory using quarterly real-time euro area data vintages, covering 2001Q1–2019Q4. The adaptive learning...

We employ senior bank loan officers' responses regarding actual and expected loan demand from enterprises linking successive surveys to determine the dominant expectation formation mechanism that best describes European senior bank loan officers' expectations. Our findings suggest that the...

The article argues that adaptive expectations play a role in deterrence and punishment by suggesting that offenders who have experienced the punishment before may expect a hight level of punishment if caught again. Therefore, punishing repeat offenders more severely than first-time offenders can...