We introduce Behavioral Learning Equilibria (BLE) into a multivariate linear framework and apply it to New Keynesian DSGE models. In a BLE, boundedly rational agents use simple, but optimal AR(1) forecasting rules whose parameters are consistent with the observed sample mean and autocorrelation...

We propose behavioral learning equilibria as a plausible explanation of coordination of individual expectations and aggregate phenomena such as excess volatility in stock prices and high persistence in inflation. Boundedly rational agents use a simple univariate linear forecasting rule and...

This paper shows that belief‐driven economic fluctuations are a general feature of many determinate macroeconomic models. In environments with hidden state variables, forecast‐model misspecification can break the link between indeterminacy and sunspots by establishing the existence of...