We investigate the relevance of Carroll's sticky information model of inflation expectations for four major European economies (France, Germany, Italy and the United Kingdom). In contrast to the most rational expectation models, households in the sticky information environment update their...

This paper examines the relation between variations in perceived inflation uncertainty and bond premia. Using the subjective probability distributions available in the Survey of Professional Forecasters we construct a quarterly time series of average individual uncertainty about inflation...

Confidence dropped universally across countries and sectors during the height of the COVID-19 pandemic in Europe. Latest survey data suggest that confidence is on track for a v-shaped recovery. The swift implementation of stringent containment measures as well as economic stimulus policy...

The majority of academic research on central bank communication has analysed a central bank’s audience as a single group. Analyses, especially empirical research have focused almost exclusively on a central bank’s interaction with the financial markets, facilitated by the...

The majority of academic research on central bank communication has analysed a central bank’s audience as a single group. Analyses, especially empirical research, have focused almost exclusively on a central bank’s interaction with the financial markets, facilitated by the availability of...

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...

The recent macroeconomic literature stresses the importance of managing heterogeneous expectations in the formulation of monetary policy. We use a stylized macro model of Howitt (1992) to investigate inflation dynamics under alternative interest rate rules when agents have heterogeneous...

Expectations play a crucial role in modern macroeconomic models. We replace the common assumption of rational expectations in a New Keynesian framework by the assumption that expectations are formed according to a heuristics switching model that has performed well in earlier work. We show how...

The adaptive learning approach has been fruitfully employed to model the formation of aggregate expectations at the macroeconomic level, as an alternative to rational expectations. This paper uses adaptive learning to understand, instead, the formation of expectations at the micro-level, by...

The present paper studies the effect of monetary policy on inflation and output within a New Keynesian model with Experience-Based Learning (EBL) that renders expectations heterogeneous across age groups. Under EBL, the age-distribution directly affects the composition of aggregate expectations...