Expectations and macroeconomic policy

Gottardo, Veronica; Lóres Diz, José; Rodriguez Gaudin, Juan; Rolando, Andrea

Expectations and macroeconomic policy

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Citació

Gottardo, V, Lóres Diz, J, Rodriguez Gaudin, J, Rolando, A. Expectations and macroeconomic policy. 2024. handle: http://hdl.handle.net/10230/68464

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Resum

In this literature review, we focus on the role of expectations in shaping macroeconomic outcomes, covering both theory and empirical applications. We review the historical evolution of expectations models, from the Keynesian paradigm, the rational expectations revolution led by Lucas and Sargent, the emergence of rational expectations in policy analysis, its limitations, and some recent developments in expectations modeling. We discuss recent empirical and methodological advances in the relationship between expectations and the Phillips curve, highlighting the relevance of expectations in inflation dynamics. We examine the influence of central banks and government policymaking on market and household expectations. We explore the impact of expectations on business cycles, particularly through the lens of news-driven economic fluctuations. We review seminal papers and contemporary research on how anticipated changes in economic fundamentals, such as news about future productivity growth, drive cyclical movements in macroeconomic variables.