Ricerc@Sapienza

Our paper estimates and compares behavioral New-Keynesian DSGE models derived under two alternative ways to introduce heterogeneous expectations. We assume that agents may be either short-sighted or long-horizon forecasters. The difference does not matter when agents have rational expectations, but it does when a fraction of them form beliefs about the future according to some heuristics. Bayesian estimations show that a behavioral model based on short forecasters fits the data better than one based on long forecasters.

We augmented a macro-model with intrinsic-inflation inertia assuming that prices farer in the past are more likely to be reset. We estimated the model for seven industrialized economies to compare their price/wage structures and to explore the potential nexus between changes the price/wage structure and changes in policy stances. We find evidence for duration-dependent-price adjustments in all the country of the sample. Although positively sloped, after few periods, price-hazard functions often become flat as in Calvo-based models.

This paper introduces model uncertainty into a behavioral New Keynesian DSGE framework and derives robust optimal monetary policies. We build a heterogeneous agents DSGE model, where a fraction of agents behave according to some forms of bounded rationality (boundedly rational agents), while the reminder operate on the basis of expectations that are corrected on average (rational agents). We consider two potential mechanisms of expectations formation to generate beliefs.

This special issue, “Macroeconomics, rationality, and institutions,” explores the role of institutions in macro models in which agents have limited rationality or interact strategically. We aim to contribute to the refinements and developments of the macro-models along several directions: The analyses of financial frictions, learning processes and expectation formation mechanisms, the study of strategic interactions and of the heterogeneity among agents, and the resulting implications for the design of institutions and (optimal) policies.

Our chapter contributes to the literature on financial crises by jointly considering the banks' balance sheet constraints with the limited--asset market participation (LAMP) assumption in an otherwise simple medium--scale New Keynesian economy. The assumption of limited participation in the asset markets and its implications for policies are investigated in, e.g., Galì et al. (2007), Di Bartolomeo and Rossi (2007a, 2007b), Bilbiie (2008), Colciago (2011), Motta and Tirelli (2012, 2015), and Albonico et al. (2015).