with unemployment and bargaining frictions. Shocks to long-run inflation expectations appear to account for much of the … expectations; in fact, conditions were deflationary all throughout the 1930s in spite of high money growth and low interest rates …

This paper analyzes how the formation of expectations constrains monetary and fiscal policy design. Economic agents … the policy regime using historical data. Regime uncertainty substantially narrows, relative to a rational expectations … analysis of the model, the menu of policies consistent with expectations stabilization. When agents are learning about the …

expectations. We provide ample anecdotal, historical, and heuristic information on the goodness-of-fit of the various exchange rate …

should intervene in the business cycle. Following Ramey (2011b), we include expectations held by consumers and firms into the … findings also underscore the need to account for expectations, as failing to do so leads to significant misinterpretation of …

According to the expectations channel, a fiscal consolidation may give rise to less contractionary, or even … design a laboratory experiment to study the conditions under which the expectations channel operates. Our results indicate … consumption, which supports the expectations channel. We also find that the expectations channel is more pronounced if the fiscal …

takes into account: (1) the role of expectations in the foreign exchange market and the feedback mechanisms between these …, this is true even in the absence of rational forward-looking expectations or sovereign foreign indebtedness. …