Canova, Fabio; Gambetti, Luca - In: American Economic Journal: Macroeconomics 2 (2010) 3, pp. 183-205
We examine the role of expectations in the Great Moderation episode. We derive theoretical restrictions in a New-Keynesian model and test them using measures of expectations obtained from survey data, the Greenbook and bond markets. Expectations explain the dynamics of inflation and interest...