@article{Expectations:1669,
      recid = {1669},
      author = {Kryvtsov, Oleksiy and Petersen, Luba},
      title = {Expectations and Monetary Policy: Experimental Evidence},
      address = {2013},
      pages = {1 online resource (70 pages)},
      abstract = {The effectiveness of monetary policy depends, to a large  extent, on market expectations of its future actions. In a  standard New Keynesian business-cycle model with rational  expectations, systematic monetary policy reduces the  variance of inflation and the output gap by at least  two-thirds. These stabilization benefits can be  substantially smaller if expectations are non-rational. We  design an economic experiment that identifies the  contribution of expectations to macroeconomic stabilization  achieved by systematic monetary policy. We find that,  despite some non-rational component in expectations formed  by experiment participants, monetary policy is quite potent  in providing stabilization, reducing macroeconomic variance  by roughly half.},
      url = {http://www.oar-rao.bank-banque-canada.ca/record/1669},
      doi = {https://doi.org/10.34989/swp-2013-44},
}