The purpose of the present paper is to provide microfoundations of how households form subjective expectations of the macroeconomy. We focus on the role of perceived news; distinguishing between good and bad news. The paper introduces a testable model where households give unequal importance (or...

Theoretically, the effect on investment of uncertainty over the demand for a firm's product is unclear because of the influence of several factors, such as the production technology and the amount of competition in the product market. It has not been possible, until now, to investigate more...