Johannes Binswanger
Title
Prof. Dr.
Last Name
Binswanger
First name
Johannes
Email
johannes.binswanger@unisg.ch
ORCID
Phone
+41 71 224 2514
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Item type:Publication, A Macroeconomy With Intuitive Thinkers(2024); ; Manuel OechslinType:conference contribution - Some of the metrics are blocked by yourconsent settings
Item type:Publication, A Macroeconomy with Intuitive Thinkers(2024-10-24); ; - Some of the metrics are blocked by yourconsent settings
Item type:Publication, A Macroeconomy with Intuitive Thinkers(2024); ; Manuel OechslinA growing body of evidence shows that, when forming expectations, households, firms, and even experts often deviate from rational expectations, adhering to intuitive models about macroeconomic relationships that conflict with actual experience. The “stagflationary” intuitive model – high output comes with low inflation – is a prominent example. Starting with a linear difference model in Blanchard-Kahn (1980) form, we develop a generic macroeconomic framework in which expectations emerge from an interplay of two mental systems. A rigorous thinking system forms expectations corresponding to standard rational expectations. An intuitive system forms expectations based on associative memory, perturbing rational expectations. As a result, households behave as if they were subject to cognitive discounting, and autonomous innovations in intuitive expectations are a source of macroeconomic fluctuations. We illustrate the tractability of the framework by applying it to “stagflationary” expectations and a New Keynesian model.Type:working paper