Expectations play a central role in modern macroeconomics. The econometric learning approach, in line with the cognitive consistency principle, models agents as forming expectations by estimating and updating subjective forecasting models in real time. This approach provides a stability test for...

We study the real effects of credit market sentiment on corporate investment and financing for a comprehensive panel of U.S. public and private firms over 1963-2016. In the short term, we find that high credit market sentiment in year t correlates with high corporate investment and debt issuance...