We must infer what the future situation would be without our interference, and what changes will be wrought by our actions. Fortunately, or unfortunately, none of these processes is infallible, or indeed ever accurate and complete. Knight (1921)

The paper discusses policy relevant models, going from (1) chronic inflation in the 20th century after WWII, to (2) credit sudden stop episodes that got exacerbated in Developed Market economies after the 2008 Lehman crisis, and appear to be associated with chronic deflation. The discussion...

This paper is a review of rational expectations models used in macroeconomic research. The purpose is to examine in some detail the differences between the models, the advantages and disadvantages of alternative models the empirical support for the models and their policy implications. The main...

This paper presents extensive results from testing for bias and serially correlated errors in a large collection of quarterly multiperiod predictions from surveys conducted since 1968 by the National Bureau of Economic Research and the American Statistical Association. The tests of the joint...

The main section of this paper discusses competing theories of aggregate supply that are currently being utilized in macroeconomic models with rational expectations. The distinction between flexible-price equilibrium models and models with nominal contracts is emphasized and three models of the...

This paper investigates the statistical properties of high frequency nominal exchange rates and forward premiums in the context of a dynamic two-country general equilibrium model. Primary focus is on the persistence, variability, leptokurtosis and conditional heteroskedasticity of exchange rates...

This paper provides a critique of the DSGE models that have come to dominate macroeconomics during the past quarter-century. It argues that at the heart of the failure were the wrong microfoundations, which failed to incorporate key aspects of economic behavior, e.g. incorporating insights from...