The paper is an attempt at an alternative to the rational expectations assumption in macroeconomic modelling. Emphasizing the concept of sentiment in contrast to the expectations of a single selected variable, it is meant to take an important step forward towards a canonical heterodox framework...

We propose a simple Keynesian business cycle model in which national income expectations of heterogeneous interacting investors affect their investment decisions. The investors' expectation formation is influenced by their sentiment: investors who hold optimistic views about the future state of...