We estimate a forward looking New Keynesian Phillips Curve (NKPC) for the U.S. using data from the Survey of Professional Forecasters as proxy for expected inflation. We find that the NKPC captures inflation dynamics well, independent from whether output or unit labor costs are used as a measure...

This paper introduces directed search into the sequential search model of Diamond (1971) by allowing buyers to observe the distribution of prices charged by two (or more) distinct subgroups of firms in the market. This enables buyers to direct their searches towards the most desirable group of...

This paper considers a linear-quadratic control problem and determines how optimal policy is affected when the private sector has finite (Shannon) capacity to process information. Such capacity constraints prevent private agents from perfectly observing the state variables and the policy...

We study adaptive learning in a monetary overlapping generations model with sticky prices and monopolistic competition for the case where learning agents observe current endogenous variables. Observability of current variables is essential for informational consistency of the learning setup with...

This paper considers a sticky price model with a cash-in-advance constraint where agents forecast inflation rates with the help of econometric models. Agents use least squares learning to estimate two competing models of which one is consistent with rational expectations once learning is...

This paper compares Bayesian decision theory with robust decision theory where the decision maker optimizes with respect to the worst state realization. For a class of robust decision problems there exists a sequence of Bayesian decision problems whose solution converges towards the robust...

PricesThis paper studies the properties of adaptive learning as a device to select amongst the rational expectations equilibria of a monetary overlapping generations model. It extends previous contributions by introducing monopolistic competition and improves upon them by analyzing learning in a...