Download or read book Essays in Expectations Formation in Macroeconomics written by Agustín H. Arias Gutiérrez and published by . This book was released on 2015 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Expectations in Macroeconomics written by Ina Hajdini and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: My dissertation studies and quantifies the implications of various expectations formation processes for what concerns macroeconomic fluctuations and monetary policy transmission. The first chapter (joint work with Marco Airaudo) studies the existence of Stochastic Consistent Expectations Equilibria (SCEE) in linear Markov regime switching models. A SCEE exists when the model-implied mean and first order autocorrelation coincide with those predicted by the agents via misspecified forecasting rules. For a simple regime-switching monetary policy model, the parametric space where at least one SCEE exists is rather wide, and may extend well beyond the rational expectations equilibrium determinacy frontier. Misspecified expectations combined with regime-switching yield a strong endogenous amplification mechanism that help generate the near unit root dynamics for inflation observed in the U.S. before the Great Moderation. The second chapter considers a New Keynesian model in which agents form expectations based on a combination of misspecified forecasts and myopia. The proposed expectations formation process is tested against Rational Expectations (RE), as well other assumptions about expectations, with inflation forecasting data from the U.S. Survey of Professional Forecasters. The paper then derives the general equilibrium solution consistent with the proposed expectations formation process and estimates the model with likelihood-based Bayesian methods. The paper yields three novel results: (i) Datastrongly prefer the combination of autoregressive misspecified forecasting rules and myopia over other alternatives, including RE; (ii) The best fitting expectations formation process for both households and firms is characterized by high degrees of myopia and simple AR(1) forecasting rules; (iii) Despite the absence of real rigidities typically found necessary for New Keynesian models with RE, the estimated model with autoregressive forecasts and myopia generates substantial internal persistence and amplification to exogenous shocks. The third chapter proves that in Full-Information RE models with exogenous Markov regime shifts, ex-post regime-dependent forecasting errors can be described by available information at the time of forecast and ex-ante forecasting revisions, separately. In economic environments with structural changes, the FIRE hypothesis gives rise to waves of over-and under-response of forecasters to current events as well as new aggregate information at the time of forecast. Using inflation and output growth forecasting data from the Survey of Professional Forecasters, the paper presents new evidence of such waves, consistent with implications of Full-Information RE in models with regime shifts. Finally, the framework and insights are generalized to any dynamic stochastic general equilibrium model with exogenous Markov shifts, whose RE solution can be written as a Markov Switching VAR process.

Download or read book Four Essays on Expectation Formation in Monetary Economics and Macroeconomics written by Thomas Beat Markus Lustenberger and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Expectations and the Economy written by and published by . This book was released on 1981 with total page 152 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essay on Macroeconomics and Expectations written by Giovanni Nicolò and published by . This book was released on 2018 with total page 224 pages. Available in PDF, EPUB and Kindle. Book excerpt: My dissertation focuses on the interactions between the conduct of U.S. monetary policy and the expectations formed by households, firms and public institutions about the state of economy. The first two chapters develop new methods that I use in the subsequent chapters to study how expectations formed by economic agents about future economic conditions affect a given economy. The second chapter considers and extends the work in Farmer (2012a) to explain U.S. post-war data, and shows that it outperforms conventional economic theories due to its ability to account for persistent movements in the data. The last chapter explores how the effectiveness of monetary policy changed in the U.S. post-war period, and I provide evidence that since the early 1980's the monetary authority implemented policies that reduced economic uncertainty deriving from unforeseen changes in the expectations about future inflation.

Download or read book Essays on Applied Macroeconomics Expectation Formation and Information written by Javier Antonio Turen Roman and published by . This book was released on 2018 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Expectation Formation written by Katharine Lauderdale and published by . This book was released on 2017 with total page 246 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Expectations written by and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The first chapter investigates the relationship between economic media sentiment and individuals' expectations and perceptions about economic conditions. We test if economic media sentiment Granger-causes individuals' expectations and opinions concerning economic conditions, controlling for macroeconomic variables. We develop a measure of economic media sentiment using a supervised machine learning method on a data set of Swedish economic media during the period 1993-2017. We classify the sentiment of 179,846 media items, stemming from 1,071 unique media outlets, and use the number of news items with positive and negative sentiment to construct a time series index of economic media sentiment. Our results show that this index Granger-causes individuals' perception of macroeconomic conditions. This indicates that the way the economic media selects and frames macroeconomic news matters for individuals' aggregate perception of macroeconomic reality. The second chapter investigates if individuals experiencing different socio-economic environments during their formative years have different expectations about future economic conditions. We analyse differences in expectations across five generations of consumers by testing if they have different levels of confidence. The chapter focuses on all the different generations of the 1900s as defined by Howe and Strauss (1997, 2000). In our econometric model, we use the Millennial Generation as a baseline, as this generation is about to make up the largest fraction of consumers in the economy. Contrary to the theory developed by the literature on generations, such as Howe and Strauss, our results show that confidence increases gradually across generations. We find that the Millennials are more confident than generations born in the first half of the 1900s, but similar in confidence to other generations born in the second half of the 1900s. The third chapter test whether there is an interaction effect between expectations and policy shocks, that is, whether the effect of monetary policy depends on household's expectations of the future state of the nationwide economy and their own personal economy. We find that a positive monetary policy shock increases household savings, but the effect is weak when households are more optimistic about their own future household finances and stronger when households are more pessimistic. Households' expectations of the Swedish economy have no impact on their savings decisions or their response to monetary policy shocks.

Download or read book Expectations written by Arie Arnon and published by Springer Nature. This book was released on 2020-03-20 with total page 244 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides a unique historical perspective on expectations in economic theory, and applications of expectations models in economic history. Based on papers presented at the 2017 Thomas Guggenheim Conference, it brings together the work of economists, historians of economics, and economic historians on issues and events concerning expectations in economics and economic history. The contributions address: (i) the history of expectations models; (ii) growth, expectations and political economy; (iii) controversies regarding expectations methods and models; (iv) expectations in theory and reality; and (v) expectations in economic history. The book opens with a lecture by Thomas Guggenheim Prize winner Duncan Foley on the evolution of expectations in modern economic thought. The remaining content is divided into two parts, the first of which focuses on the utilization of expectations in the “ancient” and “meso” periods of high theory, i.e., from Smithian to Keynesian approaches. The papers cover topics such as “modern” applications of expectations in both “Tobinesque-Phillips” and “Harrodian-Solowian” contexts, and the debate between Friedmanite and Keynesian approaches to expectation formation. In turn, the last part presents essays on the role of economic expectations in connection with historical events and contexts, ranging from the early 20th century to World War II, and on the application of expectations theory to hyperinflation and stabilization, taking Israel as a case study.

Download or read book Essays on Applied Macroeconomics Expectation Formation and Information written by J. A. Turen Roman and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Model Uncertainty in Macroeconomics written by Mingjun Zhao and published by . This book was released on 2006 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: My dissertation grapples with the issues of model uncertainty in macroeconomics, and analyzes its consequences for monetary policy. It consists of three essays. In the first essay (Chapter 1), "Monetary Policy under Misspecified Expectations", I examine policy choices for the central bank that faces uncertainty about the process of expectation formation by economic agents. The economy contains both "rule-of-thumb" agents who base their expectations on recent observations and agents who have rational expectations. The central bank is uncertain about the fraction of the rule-of-thumb agents. This uncertainty concern enables me to partially rationalize the over cautious policy stance of the Fed: empirically observed policy in the past two decades involves much weaker responses than optimal policies derived from various micro-founded models. It is well understood that when the economy is more forward-looking, the central bank displays more aggressive responses to inflation and output. But the uncertainty-averse central bank evaluates policies by the performance in the worst case. In my economy this has a high fraction of agents that are backward-looking. The best policy the central bank chooses thus involves moderate responses. That is to say, this minimax policy moves closer toward actual less responsive policy. In the second essay (Chapter 2), "Phillips Curve Uncertainty and Monetary Policy", I investigate the effect of model uncertainty on policy choices employing a more general approach, which nests the minimax and Bayesian approaches as limiting cases. The central bank is uncertain about whether the economy has a sticky price Phillips curve or a sticky information Phillips curve. I argue that how the central bank chooses a policy depends both on its perception of uncertainty environment and on its attitude towards uncertainty. I find that as the central bank either becomes more uncertainty-averse or considers sticky information more plausible, the response to inflation decreases and to output increases. The third essay (Chapter 3) is entitled "Optimal Simple Rules in RE Models with Risk Sensitive Preferences". This paper provides a useful method to solve optimal simple rules under risk sensitive preference in macro models with forward looking behavior. An application to a new Keynesian model with lagged dynamics is offered and risk sensitive preference is found to amplify policy responses.

Download or read book Consumer Expectations written by Richard Thomas Curtin and published by Cambridge University Press. This book was released on 2019-02-07 with total page 365 pages. Available in PDF, EPUB and Kindle. Book excerpt: Proposes a new comprehensive theory about how expectations are formed and how they shape the macro economy.

Download or read book Essays on Expectations and Learning in Macroeconomics written by Li Tang and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Boundedly Rational Expectations in Macroeconomics written by Tim Hagenhoff and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Macroeconomics with Imperfect Expectations written by Joao Pedro Teodoro Guerreiro and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The first chapter of this dissertation, coauthored with Martin Eichenbaum and Riccardo Bianchi-Vimercati, addresses the question: how sensitive is the power of fiscal policy at the ZLB to the assumption of rational expectations? We do so through the lens of a standard NK model in which people are level-k thinkers. Our analysis weakens the case for using government spending to stabilize the economy when the ZLB binds. The less sophisticated people are, the smaller the government-spending multiplier is. Our analysis strengthens the case for using tax policy to stabilize output when the ZLB is binding. The power of tax policy to stabilize the economy during the ZLB period is essentially undiminished when agents do not have rational expectations. Finally, we show that the way in which tax policy is communicated is critical to its effectiveness.In the second chapter, coauthored with Bence Bard ́oczy, we study the power of state-dependent unemployment insurance (UI) to stabilize short-run fluctuations, allowing for arbitrary deviations from full information and rational expectations. Expectations are critical because higher UI generosity raises consumption partly by lowering precautionary savings. If UI generosity is indexed to the unemployment rate, households must forecast the unemployment rate to anticipate the policy stance. We estimate unemployment expectations in response to identified aggregate shocks. We quantify the consequences of these imperfect expectations through the lens of a Heterogeneous Agent New Keynesian model. First, we work directly with the estimated forecast errors. Our methodological contribution is to use the non-parametric history of forecast errors and forecast revisions to solve dynamic decisions of optimizing agents. By doing so, we sidestep the need to choose a particular model of belief formation (e.g., cognitive discounting or sticky expectations). The estimated model implies that imperfect anticipation substantially affects the stimulative power of UI extensions. Second, we compare alternative ways of implementing UI policies. To run counterfactuals, we estimate a structural model of belief formation. We show that a combination of noisy information and diagnostic expectations fits the data best among a large set of popular alternatives. A UI extension that is announced directly is more stimulative in the very short run than one that is indexed to the unemployment rate.The third chapter studies how belief disagreement across households affects aggregate demand. I develop a model in which households are heterogeneously exposed to business cycles and show that the impact of disagreement can be summarized by a simple statistic-correlated disagreement-which captures the correlation between beliefs and individual business-cycle exposure. I model disagreement as endogenously heterogeneous attention. In this model, attention increases with the exposure to business cycles. Then, I show that disagreement amplifies general-equilibrium effects and acts as a propagation mechanism amplifying business cycles. I also provide evidence of this positive correlation using survey data on expectations. To quantify the implications of disagreement, I extend the analysis to a Heterogeneous-agent New Keynesian model featuring multiple sources of heterogeneity. I show that belief disagreement can substantially amplify business-cycle fluctuations. Finally, I show that targeting spending to the most cyclical workers can significantly increase the spending multiplier.

Download or read book Rational Expectations and Economic Modeling written by Robert G. Trevor and published by . This book was released on 1985 with total page 171 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Empirical Macroeconomics written by Julian Felix Ludwig and published by . This book was released on 2019 with total page 274 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation examines how expectations are formed and how they interact with economic activities. Beliefs about economic outcomes vary with timing and accuracy of information, which have important implications for macroeconomic dynamics. The importance of expectations has long been emphasized in rational expectations (RE) models (see e.g. Lucas 1972, 1976; Kydland and Prescott 1982), and diffusion of information has been modeled in many ways (see e.g. Beaudry and Portier 2004, 2006; Mankiw and Reis 2002; Woodford 2003; Sims 2003). My work builds on this literature and aims to improve the understanding of information structure, formation of beliefs, and decision-making, and how they contribute to macro business cycles. In the first chapter, I point out how identification of full information rational expectations (FIRE) models suffers from Manski's (1993) reflection problem. I extend the standard rational expectations (RE) model to allow for a more general information structure and introduce a new framework to identify the generalized model with forecaster data. Identification is no longer subject to the reflection problem when two changes are made to the information structure: the addition of news shocks and imperfect information. News shocks provide additional variation in expectations about the future. Imperfect information provides changes in beliefs about past states, through which the feedback between expectations and decisions goes only in one direction. Expectations data are consistent with both. An application to Greenbook forecasts illustrates the importance of both news shocks and learning about the past. When I apply this framework to a Blanchard and Quah (1989) decomposition, I reach qualitatively new results. For example, expansionary supply shocks decrease unemployment. Supply shocks are also particularly subject to both news and information rigidities, so relaxing the information structure is key to correctly identifying these shocks. In the second chapter, I discover how both good and bad news shocks coincide with higher uncertainty on impact. This new stylized fact is robust to different empirical models of the news shocks literature and different proxies for U.S. macro uncertainty. The new stylized fact has implications in three fields. First, bad news shocks produce the dynamics discovered in the uncertainty literature: spikes in uncertainty are followed by drops in output. I show that there is indeed some overlap between bad news and uncertainty shocks, as the effect of an uncertainty shock gets weaker when controlling for bad news shocks. Second, I show that the close relationship between news shocks and uncertainty seems to be also responsible for the close relationship between quarterly stock returns and stock market volatility - a proxy for uncertainty. This contributes to the finance literature that works on this relationship. Third, introducing a non-linear empirical model, I find additional asymmetries in the responses to news shocks due to the asymmetric response of uncertainty. This contributes directly to the news shocks literature. An important conclusion of chapters one and two is that economic shocks vary with availability of information. The third chapter deals with such heterogeneity. I relax the assumption that economic shocks of the same type are homogeneous, respectively, always have the same effect. Instead, I argue that economists identify a shock that consists of a variety of heterogeneous components. For example, a technology shock is the sum of all disaggregate technology shocks, from innovations in marketing up to inventions in the manufacturing process, which all have different effects on the economy. I discuss how standard identification methods can identify the shocks of interest despite this heterogeneity. I find that the weights on the shock components depend on the identification strategy so that different identification strategies produce different effects. This could explain why different macro papers often identify different responses to the same shock, in the same country, and over the same time period