Suchergebnisse

AbstractIn this lecture, I review work addressing three questions. First, are predictions about macro stabilization policies robust to reasonable departures from rational expectations? Second, do people's expectations converge to a particular set of rational expectations? Third, if they do converge, how quickly? I discuss examples from the literature where the answer to the first question is no. The answer to the second question is that learning equilibria converge to the "standard" rational equilibria analyzed in new Keynesian models. Finally, I discuss circumstances under which the answer to the third question is very slowly. In the examples, learning is slowest and policy analysis based on rational expectations is least robust in the face of shocks that render the stakes of getting policy "right" the highest.

"We assess the importance of nominal rigidities using a new weekly scanner data set from a major U.S. retailer, that contains information on prices, quantities, and costs for over 1,000 stores. We find that nominal rigidities are important but do not take the form of sticky prices. Instead, nominal rigidities take the form of inertia in reference prices and costs, defined as the most common prices and costs within a given quarter. Weekly prices and costs fluctuate around reference values which tend to remain constant over extended periods of time. Reference prices are particularly inertial and have an average duration of roughly one year. So, nominal rigidities are present in our data, even though weekly prices change very frequently, roughly once every two weeks. We argue that the retailer chooses the frequency with which it resets references prices so as to keep the realized markups within plus/minus twenty percent of the desired markup over reference cost"--National Bureau of Economic Research web site