This paper models expectation formation by taking into account that agents produce heterogeneous expectations due to model uncertainty, informational frictions and different capacities for processing information. We show that there are two general classes of steady states within this framework:...

Using the microdata of the Michigan Survey of Consumers, we evaluate whether U.S. consumers form macroeconomic expectations consistent with different economic concepts. We check whether their expectations are in line with the Phillips Curve, the Taylor Rule and the Income Fisher Equation. We...

This paper studies the formation of consumers inflation expectations using micro-level data from the Michigan Survey. It shows that beyond the well-established socio-economic determinants of inflation expectations like gender, income or education also other characteristics like the household s...

Using laboratory experiments within a New Keynesian macro framework, we explore the formation of inflation expectations and its interaction with monetary policy design. The central question in this paper is how to design monetary policy in the environment characterized by heterogeneous...

Legal institutions are critical for the development of market-based economies. This paper defines legal institutions and discusses different indicators to measure their quality and efficiency. It surveys a large historical and empirical literature showing the importance of legal institutions in...

This paper gauges the effect of financial deepening and bank outreach on informality using micro data from the Indian manufacturing sector and exploiting cross-industry variation in the need for external finance. We distinguish between two channels through which access to finance can reduce...

Using a novel way to identify relationship and transaction banks, we study how banks' lending techniques affect funding to SMEs over the business cycle. For 21 countries we link the lending techniques that banks use in the direct vicinity of firms to these firms' credit constraints at two...

We explore the empirical interaction between firm growth, financing constraints and job creation. Using a novel small business survey from Uganda, we find that the extent to which small businesses expand skilled employment as their sales and profits increase depends significantly on access to...