Based on a new survey question in a large and representative panel of German firms, this paper introduces a novel measure of managers' subjective uncertainty. I compare this measure of business uncertainty to respondents' business expectations and document a strong negative relationship....

This paper analyses two types of models: 1. Those based on assumptions of monetary and financial market equilibrium disturbance in line with mainstream thinking that there is self-regulating market, the units would have rational expectations, and the crisis would be a temporary phenomenon caused...

This paper investigates the accuracy and heterogeneity of output growth and inflation forecasts during the current and the four preceding NBER-dated U.S. recessions. We generate forecasts from six different models of the U.S. economy and compare them to professional forecasts from the Federal...

A puzzle from the Great Recession is an apparent mismatch between a fall in the persistence of European inflation rates, and the increased variability of expert forecasts of inflation. We explain this puzzle and show how country specific beliefs about inflation are still quite close to the...

A regime shift towards increased inflation expectations is credited with jumpstarting the recovery from the Great Depression in the United States. Germany experienced a recovery as fast and strong in the 1930s. What role did inflation expectations play at the start of this remarkable economic...

This paper studies the role of narratives for macroeconomic fluctuations. Microfounding narratives as directed acyclic graphs, we show how exposure to different narratives can affect expectations in an otherwise-standard macroeconomic framework. We identify such competing narratives in news...

This paper studies the behaviors of uncertainty through the lens of several popular models of expectation formation. The full-information rational expectations model (FIRE) predicts that both the ex ante uncertainty and the variance of ex post forecast errors are equal to the conditional...

Empirical evidence suggests consumers rely on their shopping experiences to form beliefs about inflation. In other words, they "learn by shopping". I introduce this empirical observation as an informational friction in the New Keynesian model and use it to study its consequences for the...

This paper investigates the accuracy and heterogeneity of output growth and inflation forecasts during the current and the four preceding NBER-dated U.S. recessions. We generate forecasts from six different models of the U.S. economy and compare them to professional forecasts from the Federal...

We provide empirical evidence on the Lucas Supply Function based on actual inflation surprises for 19 industrial economies. Our results show that the inflation surprise positively correlates with the output gap and that this relationship is negatively related to inflation variability.