Do expectations matter? The great moderation revisited

Fabio Canova, Luca Gambetti

Research output: Contribution to journalArticleResearchpeer-review

31 Citations (Scopus)


We examine the role of expectations in the Great Moderation episode. We derive theoretical restrictions in a New-Keynesian model and test them using measures of expectations obtained from survey data, the Greenbook and bond markets. Expectations explain the dynamics of inflation and interest rates but their importance isroughly unchanged over time. Systems with and without expectations display similar reduced form characteristics. Results are robust to changes in the structure of the empirical model. (JEL E23, E24, E31, 32).
Original languageEnglish
Pages (from-to)183-205
JournalAmerican Economic Journal: Macroeconomics
Issue number3
Publication statusPublished - 1 Jul 2010


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