Beyond Rationality: Unveiling the Role of Animal Spirits and Inflation Extrapolation in Central Bank Communication of the US

Arpan Chakraborty

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Abstract: Modern macroeconomic models, particularly those grounded in Rational Expectation Dynamic Stochastic General Equilibrium (DSGE), operate under the assumption of fully rational decision-making. This paper examines the impact of behavioral factors on the communication index/sentiment index of the US Federal Reserve. [Upon receiving the review comments, I found some technical errors in the paper. I shall update it accordingly. Please do not cite this paper without author's permission.]

Date: 2024-09, Revised 2025-03
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge and nep-mon
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