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Macro Theory with Measured Expectations

Author

Listed:
  • Ralph Luetticke

    (University of Tübingen & CEPR)

  • Christopher Roth

    (University of Cologne, ECONtribute, CEPR, CESifo, Max Planck Institute for Behavioral Economics)

  • Mirko Wiederholt

    (LMU Munich, CEPR & CESifo)

  • Johannes Wohlfart

    (University of Cologne, ECONtribute, CESifo, Max Planck Institute for Behavioral Economics)

Abstract

The Lucas critique holds that policy evaluations based on historical correlations can fail because policy changes alter expectation formation. We develop a new approach to monetary policy evaluation that addresses this concern: we elicit expectations under alternative policy scenarios from household surveys and feed these measured expectations into a heterogeneous agent model. The surveys reveal that the response of income and inflation expectations to interest rate changes is state-dependent. Incorporating these expectation differences into the model yields estimates of the effects of policy on aggregate consumption that are statedependent, varying with economic conditions at the time of the policy change.

Suggested Citation

  • Ralph Luetticke & Christopher Roth & Mirko Wiederholt & Johannes Wohlfart, 2026. "Macro Theory with Measured Expectations," ECONtribute Discussion Papers Series 414, University of Bonn and University of Cologne, Germany.
    • Handle: RePEc:ajk:ajkdps:414
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    File URL: https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_414_2026.pdf
    File Function: First version, 2026
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    More about this item

    Keywords

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    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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