A Note on Aggregation of Heterogeneous Expectations in a New Keynesian Economy

22 June 2010

This paper discusses conditions for aggregation of heterogeneous expectations in a new-keynesian economy. I show that aggregation result depends on the way agents form cross-expectations, i.e. expectations on other agents’ decision variables, and I determine a maximal class of cross-expectations operators that support aggregation. Interpretation of obtained conditions in terms of equilibrium and coordination is provided. Although they are restrictive form a mathematical viewpoint, a class of operators which support aggregation and have a natural economic interpretation is discussed.

publication year: 2010
language: english
Publications category:  ,
publishing series: IBS Working Paper
ISSN: 2451-4373
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