This paper analyzes how bounded rationality affects monetary and fiscal policy via an
empirically relevant enrichment of the New Keynesian model. It models agents' partial …

In recent years, central banks have increasingly turned to forward guidance as a central tool
of monetary policy. Standard monetary models imply that far future forward guidance has …

How does the economy respond to news about future policies or future fundamentals?
Standard practice assumes that agents have common knowledge of such news and face no …

Recently developed HANK models, which combine Heterogeneous Agents and New
Keynesian frictions, have had a considerable impact on macroeconomics. However, due to …

In August 2007, when the first signs emerged of what would come to be the most damaging
global financial crisis since the Great Depression, the New Keynesian paradigm was …

Using an analytically tractable heterogeneous agent New Keynesian model, we show that
whether incomplete markets resolve New Keynesian “paradoxes” depends on the cyclicality …

This article argues that an important, yet overlooked, determinant of the government
spending multiplier is the direction of the fiscal intervention. Regardless of whether we …

Using survey data on French households over the 2004–2018 period, we provide new
evidence on the role of households' inflation expectations for durable spending decisions. A …

This chapter surveys heterogeneous agent models with rational expectations that deliver a
finite number of heterogeneous agents as an equilibrium outcomes. Instead of having a …

Our understanding of monetary policy is complicated by an indeterminacy problem: the
same path for the nominal interest rate is consistent with multiple equilibrium paths for …