Bubble solutions of rational expectations models are identified by extra components that arise in addition to market fundamentals. In general there still exist many equilibrium paths relying on a minimal set of state variables, i.e., along which the number of lags that influence the current...

This paper exploits the term structure of interest rates to develop testable economic restrictions on the joint process of long-term interest rates and inflation when the latter is subject to a targeting policy by the Central Bank.

Qualitative answers given in the INSEE conjuctural surveys (1972-1994) by approximately 2500 households during two consecutive years aloow us to test the rationality of price and unemployment expectations on panel data.

Numerous economic problems assume the form of finding a fixed point of a continuous self-mapping on a compact interval. We consider instances where the mapping is a parametrized expected value, and we offer an iterative scheme for locating a fixed point. The proposed method can be seen as an...

Inflation-indexed bonds are fixed-income securities whose nominal cash flows are adjusted to an inflation index. In countries where these securities exist, inflation expectations are sometimes estimated as the spread between the nominal yield on a conventional bond and the real yield on an...

Using a small closed economy model Ball (1987) showed that nominal GDP targeting can lead to instability. This paper extends Ball ; s model to uncover the role inflation expectations play in generating this instability.

Recent models of monetary policy and monetary rules can have indeterminacy of equilibria. The indeterminacy property is often viewed as a difficulty of these models. We consider its significance using the learning approach to expectations formation by employing expectational stability as a...