This paper addresses the output-price volatility puzzle by studying the interaction of optimal monetary policy and agents' beliefs. We assume that agents choose their information acquisition rate by minimizing a loss function that depends on expected forecast errors and information costs....

This chapter provides an overview of recent models of heterogeneous expectations in macroeconomics. We begin with a description of household behavior in an environment with features common to many models in asset pricing, monetary theory, and New Keynesian macroeconomics. We demonstrate issues...