This paper develops a macroeconomic model of real-financial market interactions in which the credit and the business cycles reinforce each other according to a bidirectional causal relationship. We do so in the context of a computational agent-based framework, where the channelling of funds from...

Using a new consumer survey dataset, we document a new dimension of heterogeneity in inflation expectations that has implications for consumption and saving decisions as well as monetary policy transmission. We show that German households with the same inflation expectations differently assess...

Using laboratory experiments within a New Keynesian framework, we explore the interaction between the formation of inflation expectations and monetary policy design. The central question in this paper is how to design monetary policy when expectations formation is not perfectly rational....