This paper presents a cross-country horizon analysis of departures from full-information rational expectations (FIRE) among professional forecasters from 18 OECD countries. Using four well-known tests of FIRE, I find significant heterogeneity in the cross-section of results. My findings...

We construct a dynamic stochastic general equilibrium model to study optimal monetary stabilization policy. Prices are fully flexible and money is essential for trade. Our main result is that if the central bank pursues a price-level target, it can control inflation expectations and improve...

A fundamentals based monetary policy rule, which would be the optimal monetary policy without commitment when private agents have perfectly rational expectations, is unstable if in fact these agents follow standard adaptive learning rules. This problem can be overcome if private expectations are...