This paper estimates a New Keynesian model extended to include heterogeneous expectations, to revisit the evidence that postwar US macroeconomic data can be explained as the outcome of passive monetary policy, indeterminacy, and sunspot-driven fluctuations in the pre-1979 sample, with a switch...

A sunspot variable is any random variable that is not related to fundamental factors of the economy but a potential coordination device. The coordination power of sunspots has been analysed in theory and in experiments. However, some have discussed whether sunspots, e.g., public announcements...

This paper determines conditions for the existence of a unique rational expectations equilibrium-determinacy-in a monetary policy switching economy. We depart from the existing literature by providing such conditions considering all bounded equilibria. We then apply these conditions to a new...

We introduce consumption habits into an exogenous growth model augmented with a detailed government sector, and calibrate the model to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2016). We show that in contrast to the case without habits,...

We introduce government production of both output-augmenting and utility-enhancing public services into an exogenous growth model with a detailed government sector, and calibrate the model to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2016)....

We solve and test experimentally a global-games model of speculative attacks where agents can choose whether to read, at a cost, a payoff irrelevant (sunspot) announcement. Assuming that subjects exogenously believe some others to follow sunspots, we provide conditions for a unique equilibrium...

We introduce consumption habits into an exogenous growth model augmented with a detailed government sector, and calibrate the model to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2016). We show that in contrast to the case without habits,...

This paper presents an experiment on a coordination game with extrinsic random signals, in which we systematically vary the stochastic process generating these signals and measure how signals affect behavior. We find that sunspot equilibria emerge naturally if there are salient public signals....

This paper combines two strands of the experimental sunspot literature. It extends the rare literature that focuses experimentally on the coordination problems caused by sunspot variables. It also extends the literature that focuses on coordination games that have a payoff-dominant and a...

We provide a new theory of expectations-driven business cycles in which consumers' learning from prices dramatically alters the effects of aggregate shocks. Learning from prices causes changes in aggregate productivity to shift aggregate beliefs, generating positive price-quantity comovement....

We assess whether "undue optimism" (Pigou) contributes to business cycle fluctuations. In our analysis, optimism (or pessimism) pertains to total factor productivity which determines economic activity in the long run. Optimism shocks are perceived changes in productivity which do not actually...

We present conditions for the emergence of singularities in DGE models. We distinguish between slow-fast and impasse singularity types, review geometrical methods to deal with both types of singularity and apply them to DGE dynamics. We find that impasse singularities can generate new types of...

We propose a novel agent-based financial market framework in which speculators usually follow their own individual technical and fundamental trading rules to determine their orders. However, there are also sunspot-initiated periods in which their trading behavior is correlated. We are able to...

Over the past decades, the framework for financing has experienced a fundamental shift from traditional bank lending towards a broader market-based financing of financial assets. As a consequence, regulated banks increasingly focus on coping with regulatory requirements meaning that the...