Beyond Rationality: Unveiling the Role of Animal Spirits and Inflation Extrapolation in Central Bank Communication of the US

Abstract

Modern macroeconomic models, particularly those grounded in Rational Expectation Dynamic Stochastic General Equilibrium (DSGE), operate under the assumption of fully rational decision-making. This paper examines the impact of behavioral factors on the communication index/sentiment index of the US Federal Reserve. [Upon receiving the review comments, I found some technical errors in the paper. I shall update it accordingly. Please do not cite this paper without author's permission.]

Tasks

Reproductions