We develop a general framework for measuring biases in expectation formation. The method is based on the insight that biases can be inferred from the response of forecast errors to past news. Empirically, biases are measured by flexibly estimating the impulse response function of forecast...

Using a representative online panel from the US, we examine how individuals' macroeconomic expectations causally affect their personal economic prospects and their behavior. To exogenously vary respondents' expectations we provide them with different professional forecasts about the likelihood...

Using a representative online panel from the US, we examine how individuals' macroeconomic expectations causally affect their personal economic prospects and their behavior. To exogenously vary respondents' expectations, we provide them with different professional forecasts about the likelihood...

We experimentally investigate how price expectations are formed in a large asset market where subjects' only task is to forecast the future price of a risky asset. The realized prices depend on these expectations. We observe small (6 participants) and large markets (about 100 participants). In...

This paper tests the ability of popular New Keynesian models, which are traditionally used to study monetary policy and business cycles, to match the data regarding a key channel for monetary transmission: the dynamic interactions between macroeconomic variables and their corresponding...

In this paper, we build a new test of rational expectations based on the marginal distributions of realizations and subjective beliefs. This test is widely applicable, including in the common situation where realizations and beliefs are observed in two different datasets that cannot be matched....

Unique longitudinal probabilistic expectations data from the Berea Panel Study, which cover both college and early post-college periods, are used to examine young adults’ beliefs about their future incomes. We introduce a new measure of the ex post accuracy of beliefs, and two new approaches...

Unique longitudinal probabilistic expectations data from the Berea Panel Study, which cover both college and early post-college periods, are used to examine young adults’ beliefs about their future incomes. We introduce a new measure of the ex post accuracy of beliefs, and two new approaches...