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| Preface | |
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| The Rise and Fall of U.S. Inflation | |
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| Facts | |
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| Two interpretations | |
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| The triumph of natural-rate theory | |
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| The vindication of econometric policy evaluation | |
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| Readers's guide | |
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| The Lucas critique | |
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| Time-consistency and credible plans | |
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| Adaptive expectations and the Phelps problem | |
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| Equilibrium under misspecification | |
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| Two types of self-confirming equilibria | |
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| Adaptive expectations | |
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| Empirical vindication | |
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| Raw and filtered Data | |
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| Demographic adjustment and drift | |
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| Ignoring the Lucas Critique | |
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| The Lucas critique | |
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| Outline | |
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| The appeal to drifting coefficients | |
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| A loose end | |
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| Parameter drift as point of departure | |
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| Relevance of the critique | |
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| Rational expectations models | |
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| The Credibility Problem | |
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| Introduction | |
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| One-period economy | |
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| Least squares learning converges to Nash | |
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| More foresight | |
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| Appendix on stochastic approximation | |
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| Credible Government Policies | |
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| Perfection | |
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| Historical antecedents | |
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| The method of Abreu-Pearce-Stacchetti | |
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| Examples of recursive SPE | |
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| Infinite repetition of Nash outcome | |
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| Infinite repetition of a better-than-Nash outcome | |
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| Something worse: a stick and carrot strategy | |
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| The worst SPE | |
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| Multiplicity | |
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| Attaining the worst, method 1 | |
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| Attaining the worst, method 2 | |
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| Attaining the worst, method 3 | |
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| Numerical examples | |
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| Interpretations | |
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| Remedies | |
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| Adaptive Expectations (1950's) | |
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| Adaptive expectations | |
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| The original Phelps problem | |
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| Phelps problem: general version | |
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| Testing the natural-rate hypothesis | |
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| Disappearance of beliefs as state variable | |
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| Subversion of Phelps's model | |
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| Optimal Misspecified Beliefs | |
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| Equilibrium with mistakes | |
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| An experiment in Bray's lab | |
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| Misspecification | |
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| Lessons | |
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| Self-Confirming Equilibria | |
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| Two literatures | |
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| Directions of fit | |
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| Imperfect (1970's) rational expectations equilibria | |
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| Self-confirming equilibria | |
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| Objects in Phelps problem | |
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| Elements of self-confirming models | |
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| The actual Phillips curve | |
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| Self-confirmation | |
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| Direction of minimization | |
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| Vanishing parameters | |
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| Self-confirmation under classical direction | |
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| Moment formulas | |
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| Keynesian direction of fit | |
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| Government beliefs and behavior | |
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| Calculation of S | |
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| Special case by hand | |
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| Why not Ramsey? | |
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| Direction of minimization: caution | |
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| Equilibrium computation | |
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| Messages | |
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| Equilibrium with misspecified beliefs | |
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| An erroneous forecasting function | |
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| Approaching Ramsey | |
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| Grounds for optimism | |
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| Adaptive Expectations (1990's) | |
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| Least squares adaptation | |
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| Primer on recursive algorithms | |
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| Iteration | |
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| Stochastic approximations | |
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| Mean dynamics | |
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| Constant gain | |
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| Escape routes | |
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| Simplification of action functional | |
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| From computation to adaptation | |
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| Adaptation with the classical identification | |
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| The government's beliefs and behavior | |
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| RLS and the Kalman filter | |
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| Private sector beliefs | |
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| System evolution | |
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| Mean dynamics | |
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| Stochastic approximation | |
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| Adaptation with Keynesian identification | |
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| Government beliefs and behavior | |
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| Technical details | |
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| Simulations | |
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| Classical adaptive simulations | |
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| Relation to equilibria under forecast misspecification | |
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| Simulation with Keynesian adaptation | |
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| Role of discount factor | |
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| Conclusions | |
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| RLS and the Kalman filter | |
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| The Kalman filter | |
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| Recursive least squares | |
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| Matching RLS to the Kalman filter | |
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| Initial conditions for simulations | |
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| Anticipated utility | |
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| Boiler plate recursive rational expectations model | |
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| Anticipated utility model | |
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| Econometric Policy Evaluation | |
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| Introduction | |
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| Likelihood function | |
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| Estimates | |
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| Interpretation | |
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| Appendix on likelihood function | |
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| Triumph or Vindication? | |
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| Expectations and the Lucas critique | |
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| Reservations | |
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| Glossary | |
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| References | |
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| Author Index | |
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| Subject Index | |