using existing macroeconomic models by modifying expectations about policy announcements. The main advantage of our method … incorporate information about future interest rate announcements: “inattention”, “credibility”, “finite planning horizon”, and …

using existing macroeconomic models by modifying expectations about policy announcements. The main advantage of our method … incorporate information about future interest rate announcements: "inattention", "credibility", "finite planning horizon", and …

This paper analyzes monetary policy in a model with a potential unanchoring of inflation expectations. The degree of … unanchoring is given by how sensitively the public’s long-run inflation expectations respond to inflation surprises. I find that … optimal policy moves the interest rate aggressively when expectations unanchor, allowing the central bank to accommodate …

requirement that the underlying rational expectations equilibrium is locally indeterminate. We suggest ways in which policymakers …

, information transmission through changes in the interest rate creates a distortion, thus, lending an amount of credibility. This …

: lagged expectations about monetary policy influence the current inflation rate through an indexation rule. No structural … periods of transition and in stable environments. The role of expectations increases after regime shifts. This creates a link …

straightforward recipe for mitigating the welfare costs and the systematic inflation shortfall associated with expectations … sufficiently less concerned with government spending stabilization than society can eliminate expectations-driven liquidity traps …

find a higher average forecast accuracy of models that incorporate information on inflation expectations from the ECB’s SPF … inflation expectations are typically not large but significant in some periods. Both short- and long-term expectations provide … useful information. By contrast, incorporating expectations derived from financial market prices or those of firms and …

Rational expectations has been the dominant way to model expectations, but the literature has quickly moved to a more … their expectations. A standard assumption is that agents form expectations by using the correctly specified reduced form … included. Therefore, agents base expectations on a misspecified MSV solution. In contrast, we assume agents know the deep …