to time-varying macroeconomic dynamics. To do so, we build a New Keynesian model with long-horizon expectations and … utility and firms maximise the discounted flow of future profits), their current decisions are influenced by expectations of … expectations equilibrium of these models. We assume that agents have access to a set of alternative predictors that can be used to …

effective in ensuring stable and sensible implied expectations. …

In this paper, we compare two approaches to modelling behaviour under non-rational expectations in a benchmark New … Keynesian model. The ‘Euler equation’ approach modifies the equations derived under the assumption of rational expectations by … replacing the rational expectations operator with an alternative assumption about expectations formation. The ‘long …

transform the risk-neutral density into a ‘real-world’ density that better reflect agents’ actual expectations. This work offers …