A heterogeneous expectations model is provided, where private agents facing policy ignorance have to learn about the underlying fundamentals via a signal extraction problem. The model is estimated on a U.S. data set using Bayesian approach. The empirical results imply that the improvement in...

Conditional on a contractionary monetary policy shock, the labor share of value added is expected to decrease in the basic New Keynesian model. By providing firm-level evidence, we are first to validate this proposition. Using local projections and high dimensional fixed effects, we show that a...