This paper proposes the evaluation of the New Keynesian Phillips Curve (NKPC) under a new learning mechanism where VAR learning dynamics is combined with the idea of testing the validity of the forward-looking model of inflation dynamics. The key assumption is that agents’ perceived law of...

I present evidence that higher frequency measures of inflation expectations outperform lower frequency measures of inflation expectations in tests of accuracy, predictive power, and rationality. For decades, the academic literature has focused on three survey measures of expected inflation: the...

In the past decade, weak household consumption was an important reason for low rates of overall economic growth in Germany. Many explanations for the weakness have been provided and investigated in previous studies, but the role of media-driven uncertainty has not been addressed. Therefore, this...

In this paper, we empirically examine a heterogenous bounded rationality version of a hybrid New-Keynesian model. The model is estimated via the simulated method of moments using Euro Area data from 1975Q1 to 2009Q4. It is generally assumed that agents' beliefs display waves of optimism and...

This paper proposes a theory of endogenous fluctuations, grounded on a repeated game with strategic complementarity under incomplete information. The equilibrium is characterized by a persistent regime of high activity, where aggregate output tends to expand, followed by a persistent...

This study sheds new light on the question of whether or not sentiment surveys, and the expectations derived from them, are relevant to forecasting economic growth and stock returns, and whether they contain information that is orthogonal to macroeconomic and financial data. I examine 16...

New solutions to the basic standard New Keynesian model are explored. I extend De Grauwe’s model (2012), distinguishing two types of agents and different expectations rules. The central bank fixes the rate of interest. Families and firms determine aggregated demand and supply. Neither of them...

This note illustrates how agents' beliefs about economic outcomes can dynamically synchronize and de-synchronize to produce business-cycle-like fluctuations in a simple macroeconomic model. I consider a simple macroeconomic model with multiple equilibria, which are different ways that sunspots...

This note illustrates how agents' beliefs about economic outcomes can dynamically synchronize and de-synchronize to produce business-cycle-like fluctuations in a simple macroeconomic model. I consider a simple macroeconomic model with multiple equilibria, which are different ways that sunspots...