Cars Hommes

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Cars Hommes

Bank of Canada
234 Wellington Street
Ottawa, ON, K1A 0G9

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Are Long-Horizon Expectations (De-)Stabilizing? Theory and Experiments

Staff Working Paper 2019-27 George Evans, Cars Hommes, Bruce McGough, Isabelle Salle
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.

Inflation Targeting and Liquidity Traps Under Endogenous Credibility

Staff Working Paper 2019-9 Cars Hommes, Joep Lustenhouwer
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.

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