This paper investigates how economic openness affects the responsiveness of aggregate supply (AS) and aggregate demand (AD). We show that AD is flatter in more-open economies when economic openness is positively associated with the slope of AS (Romer, 1993)

The assumption of homogenous representative agents with perfect rationality is challenged by recent macroeconomic literature. In this paper, we consider an asymmetric information diffusion process from more-informed to less-informed agents in a standard cobweb-type expectation model. Our main...

We investigate the effectiveness of an aggressive anti-inflation monetary policy on the ability of agents to achieve rational expectations equilibrium (REE) forecasts of inflation. An aggressive anti-inflation policy includes a willingness to respond more forcefully to deviations from an...

This paper examines the role of a policymaker in macroeconomic outcomes. To determine the possible trade-offs posed by various policy targets, we link a well-known aggregate supply function with a policy rule. In our model we determine the conditions and explore the possibility under which a...

The assumption of perfectly rational representative agents is now commonly questioned. This paper explores the equilibrium properties of boundedly rational heterogeneous agents. We combine an adaptive learning process in a modified cobweb model within a Stackleberg framework. We assume that...

This paper investigates the effect of an aggressive price stabilizing monetary policy on the ability of agents to reach a rational expectations equilibrium (REE) for inflation and output. We provide a more robust policy implication than the one suggested by Bullard and Mitra (2002a,b). Using an...