using existing macroeconomic models by modifying expectations about policy announcements. The main advantage of our method … incorporate information about future interest rate announcements: “inattention”, “credibility”, “finite planning horizon”, and …

inferences under rational expectations, whereas the fraction of backward looking price setters increases. …

Experience-Based Learning (EBL) that renders expectations heterogeneous across age groups. Under EBL, the age …-distribution directly affects the composition of aggregate expectations which gives rise to a novel channel by which the demographic …-independent expectations, we show that EBL weakens the pass-through of monetary policy on aggregate demand. This affects monetary policy …

We study zero interest-rate policy in response to a large negative demand shock when long-run expectations can fall … over time. Because falling expectations make monetary policy less effective by raising real interest rates, the optimal … forward guidance policy makes large front-loaded promises to stabilize expectations. Policy is too stimulatory in the event of …

This paper analyzes monetary policy in a model with a potential unanchoring of inflation expectations. The degree of … unanchoring is given by how sensitively the public's long-run inflation expectations respond to inflation surprises. I find that … optimal policy moves the interest rate aggressively when expectations unanchor, allowing the central bank to accommodate …

policy rules: the assumed manner of expectations formation. Following a considerable literature on learning, it is assumed … learning dynamics converge to the equilibrium predicted by rational expectations equilibrium analysis. This question is … Taylor rule ensures convergence to rational expectations equilibrium, if the so-called Taylor principle is satisfied, under …

past policy has no effect on expectations of future policy. However, when people's policy forecasts are based on the … expectations of future policy, and the time-consistent solution improves. Therefore, a successful policymaker needs to know how … present policy affects people's policy expectations …

This paper analyzes monetary policy in a model with a potential unanchoring of inflation expectations. The degree of … unanchoring is given by how sensitively the public’s long-run inflation expectations respond to inflation surprises. I find that … optimal policy moves the interest rate aggressively when expectations unanchor, allowing the central bank to accommodate …

Price-level targeting (PLT) is optimal under the fully-informed rational expectations (FIRE) benchmark but lacks … experiment - where expectations are elicited from human subjects - to collect data on expectations, inflation and output dynamics … emulate the subjects' expectations with a micro-founded heterogeneous-expectation New Keynesian (HENK) model and reproduce the …