We develop methods to solve general equilibrium models in which forward-looking agents are subject to waves of pessimism, optimism, and uncertainty that turn out to critically affect macroeconomic outcomes. Agents in the model are fully rational, conduct Bayesian learning, and they know that...

We embed a news shock, a noisy indicator of the future state, in a two-state Markovswitching growth model. Our framework, combined with parameter learning, features rich history-dependent uncertainty dynamics. We show that bad news that arrives during a prolonged economic boom can trigger a...

A large literature suggests that the expected equity risk premium is countercyclical. Using a variety of different measures for this risk premium, we document that it also exhibits growth asymmetry, i.e. the risk premium rises sharply in recessions and declines much more gradually during the...

We develop and estimate a general equilibrium model to quantitatively assess the effects and welfare implications of central bank transparency. Monetary policy can deviate from active inflation stabilization and agents conduct Bayesian learning about the nature of these deviations. Under...

We develop methods to solve general equilibrium models in which forward-looking agents are subject to waves of pessimism, optimism, and uncertainty that turn out to critically affect macroeconomic outcomes. Agents in the model are fully rational, conduct Bayesian learning, and they know that...

We develop and estimate a general equilibrium model to quantitatively assess the effects and welfare implications of central bank transparency. Monetary policy can deviate from active inflation stabilization and agents conduct Bayesian learning about the nature of these deviations. Under...

We embed a news shock, a noisy indicator of the future state, in a two-state Markovswitching growth model. Our framework, combined with parameter learning, features rich history-dependent uncertainty dynamics. We show that bad news that arrives during a prolonged economic boom can trigger a...