This paper develops a small forward-looking macroeconomic model where the Federal Reserve estimates the level of potential output in real time by running a regression on past output data. The Fed's perceived output gap is used as an input to the monetary policy rule while the true output gap...

This paper introduces a form of boundedly-rational expectations into an otherwise standard New Keynesian Phillips curve. The representative agent's perceived law of motion allows for both temporary and permanent shocks to inflation, the latter intended to capture the possibility of evolving...

This paper introduces a form of boundedly-rational inflation expectations in the New Keynesian Phillips curve. The representative agent is assumed to behave as an econometrician, employing a time series model for inflation that allows for both permanent and temporary shocks. The near-unity...