Caballero, Ricardo J.; Simsek, Alp - 2022
Central banks (the Fed) and markets (the market) often disagree about the path of interest rates. We develop a model … where these different views stem from disagreements between the Fed and the market about future aggregate demand. We then … activity. In our model, agents learn from the data but not from each other—they are opinionated. In this context, the market …