TY - JOUR AU - Angeletos, George-Marios AU - Huo, Zhen TI - Myopia and Anchoring JF - National Bureau of Economic Research Working Paper Series VL - No. 24545 PY - 2018 Y2 - April 2018 DO - 10.3386/w24545 UR - http://www.nber.org/papers/w24545 L1 - http://www.nber.org/papers/w24545.pdf N1 - Author contact info: George-Marios Angeletos Department of Economics, E52-530 MIT 50 Memorial Drive Cambridge, MA 02142 Tel: 617/452-3859 Fax: 617/253-1330 E-Mail: angelet@mit.edu Zhen Huo Department of Economics Yale University New Haven, CT 06520 E-Mail: zhen.huo@yale.edu AB - We consider a stationary setting featuring forward-looking behavior, strategic complementarity, and incomplete information. We obtain an observational equivalence result that recasts the aggregate dynamics of this setting as that of a representative-agent model featuring two distortions: myopia, as in models with imperfect foresight; and anchoring of the current outcome to the past outcome, as in models with habit persistence and adjustment costs. We further show that the as-if distortions are larger when the general-equilibrium feedback, or the strategic complementarity, is stronger. These results offer a fresh perspective on the observable implications of informational frictions; build a useful bridge to the DSGE literature; and help reduce an uncomfortable gap between the prevailing structural interpretations of the macroeconomic time series and the related microeconomic evidence. Finally, an empirical evaluation is offered in the context of inflation, wherein it is shown how our results can rationalize existing estimates of the Hybrid NKPC while also matching survey evidence on expectations. ER -