Macroeconomics, rationality, and institutions

This special issue, “Macroeconomics, rationality, and institutions,” explores the role of institutions in macro models in which agents have limited rationality or interact strategically. We aim to contribute to the refinements and developments of the macro-models along several directions: The analyses of financial frictions, learning processes and expectation formation mechanisms, the study of strategic interactions and of the heterogeneity among agents, and the resulting implications for the design of institutions and (optimal) policies. These developments not only improve our understanding of the macroeconomic interactions among agents, but also contribute to answer several open questions regarding relevant policy issues, such as the power and relevance of forward guidance or quantitative easing. This introductory article reviews the recent debate on the role of DSGE models, heavily criticized after the financial crisis, to provide the background for the contributions presented in this issue. We also briefly review the articles presented in this special issue.