The recent macroeconomic literature stresses the importance of managing heterogeneous expectations in the formulation of monetary policy. We use a stylized macro model of Howitt (1992) to investigate inflation dynamics under alternative interest rate rules when agents have heterogeneous...

This essay links some of my own work on expectations, learning and bounded rationality to the inspiring ideas of Jean-Michel Grandmont. In particular, my work on consistent expectations and behavioral learning equilibria may be seen as formalizations of JMG's ideas of self-fulfilling mistakes....

We introduce a simple equilibrium model of a market for loans, where house- holds lend to firms based on heterogeneous expectations about their loan default probability. Agents select among heterogeneous expectation rules, based upon their relative performance. A small fraction of pessimistic...