We construct, estimate and explore the monetary policy consequences of a New Keynesian (NK) behavioural model with bounded-rationality and heterogeneous agents. We radically depart from most existing models of this genre in our treatment of bounded rationality and learning. Instead of the usual...

This paper analyzes farsighted stable sets when agents have heterogeneous expectations over the dominance paths. We consider expectation functions satisfying two properties of path-persistence and consistency. We show that farsighted stable sets with heterogeneous expectations always exist and...