Cars Hommes is Senior Research Director of the Financial Markets Department at the Bank of Canada. His research field is behavioral macro-finance, with primary research interests in bounded rationality, expectations and learning, evolutionary finance, experimental economics and complex macro-financial systems. Cars Hommes received his PhD in economics from University of Groningen and teaches behavioral macro-finance at the University of Amsterdam.
Staff analytical notes
We introduce a model to detect periods of extrapolative house price expectations across Canadian cities. The House Price Exuberance Indicator can be updated on a quarterly basis to support the Bank of Canada’s broader assessment of housing market imbalances.
Staff working papers
Economic activities typically involve coordination among a large number of agents. These agents have to anticipate what other agents think before making their own decisions.
Most models in finance assume that agents make trading plans over the infinite future. We consider instead that they are boundedly rational and may only form forecasts over a limited horizon.
Policy implications are derived for an inflation-targeting central bank, whose credibility is endogenous and depends on its past ability to achieve its targets. This is done in a New Keynesian framework with heterogeneous and boundedly rational expectations.