In the past year, the staff of the Board of Governors of the Federal Reserve System began using a new macroeconomic model of the U.S. economy referred to as the FRB/US model. This system of mathematical equations, describing interactions among economic measures such as inflation, interest rates,...

We develop an estimated model of the U.S. economy in which agents form expectations by continually updating their beliefs regarding the behavior of the economy and monetary policy. We explore the effects of policymakers' misperceptions of the natural rate of unemployment during the late 1960s...