News - or foresight - about future economic fundamentals can create rational expectations equilibria with non-fundamental representations that pose substantial challenges to econometric efforts to recover the structural shocks to which economic agents react. Using tax policies as a leading...

The interaction between credit frictions, financial innovation, and a switch from optimistic to pessimistic beliefs played a central role in the 2008 financial crisis. This paper develops a quantitative general equilibrium framework in which this interaction drives the financial amplification...

We propose a new approach to test the full-information rational expectations hypothesis which can identify whether rejections of the null arise from information rigidities. This approach quantifies the economic significance of departures from the null and the underlying degree of information...

Anchoring of inflation expectations is of paramount importance for central banks' ability to deliver stable inflation and minimize price dispersion. Relying on daily interest rates and inflation forecasts from major financial institutions in the United States, we calculate monetary policy...

In this paper, we use a DSGE model to study the passive and time-varying implementation of macroprudential policy when policymakers have noisy and lagged data, as commonly observed in lowincome and developing countries (LIDCs). The model features an economy with two agents; households and...

Many low-income countries continue to describe their monetary policy framework in terms of targets on monetary aggregates. This contrasts with most modern discussions of monetary policy, and with most practice. We extend the new-Keynesian model to provide a role for “M” in the conduct of...

Is it desirable that central banks be more transparent in the communication of sensible information when agents have diverse private information? In practice, there exists some consensus about the benefits of acting in this way. However, other studies warn that increasing the precision of public...