The formation of macroeconomic policy is conceptualized as on-going process of interaction between private individuals and a centralized policymaker. This interaction is inherently strategic in nature and lends itself to a game-theoretical treatment. Starting from the basic principle of rational...

We propose an extension of the class of rational expectations bubbles (REBs) to the more general rational beliefs setting of Kurz (1994a,b). In a potentially non-stationary but stationarizable environment, it is possible to hold more than one (small-r) “rational” expectation. When rational...