As one of the first texts to take a behavioral approach to macroeconomic expectations, this book introduces a new way of doing economics. Roetheli uses cognitive psychology in a bottom-up method of modeling macroeconomic expectations. His research is based on laboratory experiments and historical data, which he extends to real-world situations. Pattern extrapolation is shown to be the key to understanding expectations of inflation and income. The quantitative model of expectations is used to analyze the course of inflation and nominal interest rates in a range of countries and historical periods. The model of expected income is applied to the analysis of business cycle phenomena such as the great recession in the United States. Data and spreadsheets are provided for readers to do their own computations of macroeconomic expectations. This book offers new perspectives in many areas of macro and financial economics.

This book offers a broad perspective on the economics of expectations. Experimental studies are used to analyse how human bounded rationality affects economic performance. The challenges posed for policy making are also addressed. Tobias Rotheli begins by presenting the basic tools and theoretical models necessary to our understanding of rational and boundedly rational expectations and their role in economic life. Key topics discussed include expectations in general equilibrium theory, probabilities and expected utility, heterogeneity of economic agents, behavioural alternatives to forecasting and the effects of expectations heuristics, particularly in financial markets. The author then goes on to explore the fascinating insights behavioural economics - the empirical analysis of economic decision making - has to offer. Here experimental studies illustrate the effects of costly information, the role of pattern recognition as basis of expectations, anticipation and coordination failures, and the role of expectations in determining the general price level. The book also addresses the implications of the experimental findings for applied economics. Aiming to achieve the accessibility of a textbook, this research monograph will appeal to economic researchers interested in economic behaviour and theory, as well as students taking upper-level undergraduate and graduate courses. It will also be of interest to economists working in business and government.

This book offers a broad perspective on the economics of expectations. Experimental studies are used to analyse how human bounded rationality affects economic performance. The challenges posed for policy making are also addressed. Tobias Rotheli begins by presenting the basic tools and theoretical models necessary to our understanding of rational and boundedly rational expectations and their role in economic life. Key topics discussed include expectations in general equilibrium theory, probabilities and expected utility, heterogeneity of economic agents, behavioural alternatives to forecasting and the effects of expectations heuristics, particularly in financial markets. The author then goes on to explore the fascinating insights behavioural economics - the empirical analysis of economic decision making - has to offer. Here experimental studies illustrate the effects of costly information, the role of pattern recognition as basis of expectations, anticipation and coordination failures, and the role of expectations in determining the general price level. The book also addresses the implications of the experimental findings for applied economics. Aiming to achieve the accessibility of a textbook, this research monograph will appeal to economic researchers interested in economic behaviour and theory, as well as students taking upper-level undergraduate and graduate courses. It will also be of interest to economists working in business and government.

As one of the first texts to take a behavioral approach to macroeconomic expectations, this book introduces a new way of doing economics. Roetheli uses cognitive psychology in a bottom-up method of modeling macroeconomic expectations. His research is based on laboratory experiments and historical data, which he extends to real-world situations. Pattern extrapolation is shown to be the key to understanding expectations of inflation and income. The quantitative model of expectations is used to analyze the course of inflation and nominal interest rates in a range of countries and historical periods. The model of expected income is applied to the analysis of business cycle phenomena such as the great recession in the United States. Data and spreadsheets are provided for readers to do their own computations of macroeconomic expectations. This book offers new perspectives in many areas of macro and financial economics.