Macroeconomic stability and heterogeneous expectations

The recent macroeconomic literature has been stressing the role of heterogeneous expectations in the formulation of monetary policy and recent laboratory experiments provided more evidence about this phenomenon. We use a simple model made up by the standard aggregate demand function, the New Keynesian Phillips curve and a Taylor rule to deal with di fferent issues, such as the stabilizing eff ect of diff erent monetary policies in a system populated by heterogeneous agents. The dynamic properties of the system depends crucially on the set of forecasting rules, on agent sensitivity in choosing the best predictor and on Central Bank's reaction to inflation. In particular we investigate whether the policy makers can sharpen macroeconomic stability in the presence of heterogeneous expectations about future in inflation and output gap and how this framework is able to reduce volatility and distortion in the whole system.