In this paper, we document the forecasting performance of estimated basic dynamic stochastic general equilibrium (DSGE) models and compare this to extended versions which consider alternative expectation formation assumptions and financial frictions. We also show how standard model features,...

Are uncertainty shocks a major source of business cycle fluctuations? This paper studies theeffect of a mean preserving shock to the variance of aggregate total factor productivity(macro uncertainty) and to the dispersion of entrepreneurs' idiosyncratic productivity (microuncertainty) in a...

We develop an equivalence between the equilibrium effects of incomplete information and those of two behavioral distortions: myopia, or extra discounting of the future; and anchoring of current behavior to past behavior, as in models with habit persistence or adjustment costs. We show how these...

We consider a stationary setting featuring forward-looking behavior, higher-order uncertainty, and learning. We obtain an observational equivalence result that recasts the aggregate dynamics of this setting as that of a representative-agent model featuring two distortions: myopia in the sense of...

We combine a standard stock-flow housing market model, incorporating explicit relationships between house prices, the housing stock, and the rent level, with a parsimonious expectation formation scheme of housing market investors, reflecting an evolving mix of extrapolative and regressive...