We derive the optimal monetary policy in a sticky price model when private agents follow adaptive learning. We show … that this slight departure from rationality has important implications for policy design. The central bank faces a new … intertemporal trade-off, not present under rational expectations: it is optimal to forego stabilizing the economy in the present in …

effect of the coronavirus crisis on household income and retirement wealth, households' expectations about the recovery, and …, which are stronger for younger households and those in lower income and wealth quintiles. Expectations about household … upward adjustments in expectations about household debt, desired working hours, and retirement age. Finally, respondents …

spikes in inflation may become ‘baked in’ to inflation expectations, but only among those with the most positive subjective …

How do households adjust their spending behavior in response to changes in home price expectations? We conduct a field … experiment with a sample of Americans that links survey data on home price expectations to actual spending behaviour as measured … in a rich home-scanner dataset. In the experiment we exogenously vary households' home price expectations by providing …

Bayesian Updating is the dominant theory of learning in economics. The theory is silent about how individuals react to … do not systematically deviate from reverse Bayesianism, but they do not seem to expect an unknown event when this is …

Bayesian updating is the dominant theory of learning. However, the theory is silent about how individuals react to … situations, we test if subjects update their beliefs according to “reverse Bayesianism”, under which the relative likelihoods of … events and find that participants do not systematically deviate from reverse Bayesianism. However, we do find well …

Agents forming adaptive expectations generally make systematic mistakes. This characterization has fostered the … rejection of adaptive expectations in macroeconomics. Experimental evidence, however, shows that in complex environments human … subjects frequently rely on adaptive heuristics – model-consistent expectations being simply too difficult or impossible to …