I present evidence of systematically heterogeneous expectations, a violation of the Rational Expectations Hypothesis. I demonstrate that the expectations of different gender and wealth cohorts have different relative abilities to predict inflation, interest rates, unemployment, income, stock...

By using the Economic Sentiment Indicator and Autoregressive Markov Switching models, this paper provides an effective tool to identify and characterize expectations of business cycle phases for Germany, Spain, the Euro Area, and the European Union. This information is useful for policy makers...

Evolutionary game theory provides a fresh perspective on the prospects that agents with heterogeneous expectations might eventually come to agree on a single expectation corresponding to the efficient markets hypothesis. We establish conditions where agreement on a unique forecast is stable, but...

The Rational Expectations Hypothesis (REH) states that the actual outcome will be identical to the optimal forecast when all obtainable information had been utilized in forming the expectations. This study intends to empirically examine the existence of rational behavior in the banks and other...

Evolutionary game theory provides a fresh perspective on the prospects that agents with heterogeneous expectations might eventually come to agree on a single expectation corresponding to the efficient markets hypothesis. We establish conditions where agreement on a unique forecast is stable, but...

This papaer evaluates analysts' consensus long run earnings growth forecasts. It is shown that the correlation between forecast earnings growth and actual earnings growth is extremely low. Consistent with other studies, forecast earnings growth is found to be too optimistic. This is illustrated...

In the debate on the benefits and costs of international financial integration recent literature has emphasized thresholds in the development of domestic markets as preconditions to benefitting from international integration. This paper offers an alternative view - that of development of...

Over the past two years, the IMF staff has been developing a new multicountry macroeconomic model called the Global Economy Model (GEM). This paper explains why such a model is needed, how GEM differs from its predecessor model, and how the new features of the model can improve the IMF’s...

We analyze the role of consumer expectations in a Hotelling model of price competition when products exhibit network effects. Expectations can be strong (stubborn), weak (price-sensitive) or partially stubborn (a mix of weak and strong). As a rule, the price-sensitivity of demand declines when...

The authors study the timing of leniency applications using a novel application of multi-spell discrete-time survival analysis for a sample of cartels prosecuted by the European Commission between 1996 and 2014. The start of a Commission investigation does not affect the rate by which...