Chapter 1. Introduction -- Chapter 2. Finite Difference Equations and Systems of Difference Equations in Rational Expectations -- Chapter 3. Models of Representative Agents and Real Business Cycle Models -- Chapter 4. A Simplified Illustration of Numerical Solution Methods of DSGE Models With...

We study the impact of diverse beliefs on conduct of monetary policy. We use a New Keynesian Model solved with a quadratic approximation. Aggregation renders the belief distribution an aggregate state variable. Diverse expectations change standard results about a smooth trade-off between...

In a model where investors disagree about the fundamentals of two stocks, the state price density depends on investor disagreements for both stocks, especially the larger stock. This implies that disagreement among investors in a large firm has a spillover effect on the pricing of other stocks...