This paper argues that political polarization plays a key role in shaping the economic expectations and consumption behavior of households. Using a combination of survey and consumption data of U.S. households, we document five facts. First, household beliefs are well-described by a single...

This paper studies optimal monetary policy under rational inattention: the policy maker optimally chooses her information subject to a processing constraint. Our analytical results emphasize how the policy maker’s information choices shape her expectations and the dynamics of the macroeconomy....

This paper argues for a careful (re)consideration of the expectations formation process and a more systematic inclusion of real-time expectations through survey data in macroeconomic analyses. While the rational expectations revolution has allowed for great leaps in macroeconomic modeling, the...

This paper argues for a careful (re)consideration of the expectations formation process and a more systematic inclusion of real-time expectations through survey data in macroeconomic analyses. While the rational expectations revolution has allowed for great leaps in macroeconomic modeling, the...