We examine the standard New Keynesian economy's Ramsey problem written in terms of instrument settings instead of allocations. Its standard formulation makes two instruments available: the path of current and future interest rates, and an "open mouth operation" which selects one of the many...

New Keynesian economies with active interest rate rules gain equilibrium determinacy from the central bank's incredible off-equilibrium-path promises (Cochrane, 2011). We suppose instead that the central bank sets interest rate paths and occasionally has the discretion to change them. Private...

Overconfidence is one of the most important biases in financial markets and commonly associated with excessive trading and asset market bubbles. So far, most of the finance literature takes overconfidence as a given, "static" personality trait. In this paper we introduce a novel experimental...