Natural Expectations and Macroeconomic Fluctuations.

@article{Fuster2010NaturalEA,
  title={Natural Expectations and Macroeconomic Fluctuations.},
  author={Andreas Fuster and David Laibson and Brock Mendel},
  journal={The journal of economic perspectives : a journal of the American Economic Association},
  year={2010},
  volume={24 4},
  pages={
          67-84
        }
}
A large body of empirical evidence suggests that beliefs systematically deviate from perfect rationality. Much of the evidence implies that economic agents tend to form forecasts that are excessively influenced by recent changes. We present a parsimonious quasi-rational model that we call natural expectations, which falls between rational expectations and (naive) intuitive expectations. (Intuitive expectations are formed by running growth regressions with a limited number of right-hand-side… CONTINUE READING

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