helps overall macroeconomic stability by making expectations operate like automatic stabilizers. Second, under a price level … arguments in favour of or against price level path stability depend on the degree of dependence of private sector expectations …

This paper analyzes how the formation of expectations constrains monetary and fiscal policy design. Economic agents … the policy regime using historical data. Regime uncertainty substantially narrows, relative to a rational expectations … analysis of the model, the menu of policies consistent with expectations stabilization. When agents are learning about the …

agents have perfectly rational expectations, is unstable if in fact these agents follow standard adaptive learning rules …. This problem can be overcome if private expectations are observed and suitably incorporated into the policy maker's optimal … observed household and firm expectations …

agents have perfectly rational expectations, is unstable if in fact these agents follow standard adaptive learning rules …. This problem can be overcome if private expectations are observed and suitable incorporated into the policy maker's optimal … observed household and firm expectations …

agents have perfectly rational expectations, is unstable if in fact these agents follow standard adaptive learning rules …. This problem can be overcome if private expectations are observed and suitably incorporated into the policy maker's optimal … observed household and firm expectations …

processing rate. Although a decline of policy activism directly increases output volatility, it indirectly anchors expectations …

processing rate. Although a decline of policy activism directly increases output volatility, it indirectly anchors expectations …

Keynesian model. We find that slightly departing from rational expectations substantially changes the way the central bank deals … (output gap) today or stabilizing it tomorrow. The central bank should optimally anchoring private agents expectations in the … short term in exchange of easier future intratemporal trade-offs. Compared to the rational expectations equilibrium, the …