ABSTRACT Real-time in-situ defect recognition is a big challenge in metal additive manufacturing (AM). This research proposes a novel convolutional neural network (CNN) framework integrated with attention mechanisms to tackle it. The chosen CNN framework is ResNet-18, and the three integrated attention mechanisms are Spatial Attention (SA), Convolutional Block Attention Module (CBAM), and Squeeze-and-Excitation (SE). These mechanisms improve the framework’s capacity to highlight serious flaws and filter out unnecessary background noise. 1800 high-resolution images (six defect categories) from the NEU Steel Surface Defect Dataset were used to analyse the model. The data was split into 60/20/20, and a 5-fold cross-validation was executed. Hyperparameter optimisation and data augmentation strategies were employed to improve the framework’s generalisation. Experimental evaluation revealed notable performance improvements, with the model achieving 1.0, a perfect macro F1-score, indicating that both precision and recall are perfect. Nevertheless, rational performance expectations indicate a 10–15% target enhancement above the baseline. Error analysis revealed demanding categories, including Inclusion and Patches, that require more attention. This research showcases the promising nature of attention-enhanced CNNs in industrial defect detection and directs future research in optimising real-time defect detection in AM systems.

ABSTRACT The paper questions the thesis that Keynes's theoretical contributions lacked ‘solid microfoundations'. First, it contributes to the perception that Keynes's theory does not equal Keynesian theory by emphasising the role of money and arguing that: (i) (Neo)Classical economics is not a special case of the General Theory and (ii) when dealing with Keynes's theory, we should use the term Monetary Theory of Production. The article then provides a brief historical overview of what Denis (2016, ‘Microfoundations.' Review of Political Economy 28 (1): 134-152) called the ‘microfoundation project'. It seeks its definition in the New Classical Macroeconomics literature of the 1970s and, more importantly, presents its core components: optimisation, market clearing, the representative agent and the rational expectations hypothesis. In light of the overall inadequacy of this project, the article proposes new (and tentative) criteria based on which we ought to identify new microfoundations: agents' abilities and behaviours, as well as the institutional environment in which they act. Based on the new criteria advanced and a critique of the core components of the microfoundation project, the article proceeds to investigate whether Keynes's MTP lacks solid microfoundations and explores the role played by money and time in Keynes’s conceptions of micro-behaviour.

Abstract I examine how US households form stock market expectations and how these expectations affect portfolio choice. I find households’ stock market expectations are downward biased and inconsistent with rational expectations. Although expectations exhibit persistence, adaptation to recent outcomes appears only in specifications without controls. Moreover, although statistically significant, the estimate is qualitatively negligible, and the joint parameters when considered alongside the persistence estimate are inconsistent with adaptive learning. Furthermore, in distinguishing between active and indirect investments, I show income and risk aversion matter for active but not indirect investments, whereas stock market expectations play a similar role in both.

ABSTRACT Oil price shocks play an important role in macroeconomic stability. This paper examines nonlinear effects of oil price shocks on inflation and output gap between active and passive monetary policy regimes. The novelty of this paper is that we estimate the Markov-switching Rational Expectation New Keynesian model augmented with oil prices for China. The results show that the impact of oil price shocks on inflation and output gap is large when the oil price volatility is high. The Chinese monetary policy, however, mitigates oil price shocks, depressing the effects of high-volatility oil price shocks on inflation. We also provide estimates of the inflation-oil price elasticity and output gap-oil price elasticity in different monetary policy regimes. Our findings yield implications for monetary policy regimes and oil price shocks in the short- and long-run for China.

Axiomatization of the Farsighted Stable Set and the (Strong) Rational Expectations Farsighted Stable Set

We recover forward-looking expected net-of-fee abnormal returns (alphas) for active equity mutual funds from analyst ratings. In contrast to the typical equilibrium implication of zero alphas, analyst alphas are negative for most funds, but positive for the largest funds. We compare analysts’ subjective expectations with expectations from a rational expectations learning model. The model’s rational learner believes that an increase in fund size leads to a decrease in returns, but we find no evidence that analysts believe so. Consistently, counterfactual ratings based on the rational model tend to outperform analysts’ ratings out of sample. Investor fund flows respond significantly to analyst ratings. This paper was accepted by Lukas Schmid, finance. Funding: Support from the Center for Big Data in Finance [Grant DNRF167], the Danish Finance Institute, and the Swedish House of Finance is gratefully acknowledged. This work was funded by Fundação para a Ciência e a Tecnologia (UIDB/00124/2025, UID/PRR/124/2025, Nova School of Business and Economics) and LISBOA2030 (DataLab2030 - LISBOA2030-FEDER-01314200). Supplemental Material: The online appendices and data files are available at https://doi.org/10.1287/mnsc.2024.04419 .

Abstract The thesis of this essay is that, in heterogeneous agent macroeconomics, the assumption of rational expectations about equilibrium prices is unrealistic and should be replaced. Rational expectations imply that decision makers forecast equilibrium prices like interest rates by forecasting cross-sectional distributions. This leads to an extreme version of the curse of dimensionality: dynamic programming problems in which the entire distribution is a state variable (‘Master equation’ a.k.a. ‘Monster equation’). Frontier computational methods struggle with these infinite-dimensional Bellman equations, making it implausible that real-world agents solve the associated decision problems. These difficulties also limit the applicability of the heterogeneous-agent approach to central questions in macroeconomics – those involving aggregate risk and non-linearities such as financial crises. This troublesome feature of the rational expectations assumption poses a challenge: what should replace it? I outline three criteria for alternative approaches: (1) computational tractability, (2) consistency with empirical evidence, and (3) (some) immunity to the Lucas critique. I then discuss several promising directions, including temporary equilibrium approaches, incorporating survey expectations, least-squares learning, and reinforcement learning.

This study investigates the social logic of green capitalism by examining how market performance, firm performance, and corporate governance influence green accounting practices in Indonesia’s energy and mining industries. Conducted on 40 companies listed on the Indonesia Stock Exchange from 2020 to 2024, this research adopts a purposive sampling method and employs panel data regression analysis using the EViews program. The findings reveal that corporate governance—measured through institutional ownership—has a positive and significant effect on green accounting, while market performance (measured by price to book value) and firm performance (measured by return on assets) show no significant influence. These results indicate that the adoption of green accounting in Indonesia’s extractive sector is not primarily driven by market or profitability incentives, but rather by governance mechanisms and institutional legitimacy. The study contributes to the sociology of economy by situating green accounting within the political economy of sustainability, where corporate environmental responsibility emerges as a negotiated outcome between economic rationality and social expectations. The novelty of this research lies in revealing the institutional embeddedness of green capitalism in emerging economies, demonstrating that environmental accountability is shaped more by governance ethics than by market efficiency. The study recommends that future sociological inquiries expand the analysis to cross-sectoral contexts and incorporate global regulatory pressures in modeling the evolution of green corporate behavior.

Abstract This paper examines the simplest OLG models with capital accumulation, demonstrating three results that stand in marked contrast to those of the standard model: first, the possibility of multiple steady states; second, the possibility of multiple momentary equilibria under rational expectations; third, one of the implications of multiple momentary equilibria is that dynamics may be marked by complex fluctuations (lacking even periodicity), but still within well-defined bounds. We provide quite general conditions (with general utility and production functions) under which, in the simplest of OLG models, there can be multiple steady states, multiple momentary equilibria, and complex dynamics.

We develop and estimate a parsimonious New-Keynesian small open-economy model that incorporates Diagnostic Expectations (DE)—a behavioral alternative to Rational Expectations (RE). Under DE, agents systematically overreact to new information, generating additional endogenous volatility. Our empirical analysis provides robust support for the DE framework: it fits Canadian data significantly better than the nested RE benchmark and improves forecasts of key macroeconomic variables, including real GDP growth, even during crises such as the Global Financial Crisis. These gains arise because DE reshapes the transmission of shocks, amplifying their effects and strengthening the exchange-rate channel of monetary policy. As a result, the relative importance of structural shocks shifts—with greater roles for supply shocks—and policymakers face a meaningfully worse inflation–output volatility trade-off. Taken together, our results highlight the relevance of behavioral expectations for open-economy dynamics and policy design.

This paper reassesses the empirical validity of the Capital Asset Pricing Model (CAPM) by examining the structural instability of the Security Market Line (SML) under asymmetric volatility, endogenous regime transitions, and behavioral frictions. Using high-frequency data (2015–2024) from four major U.S. large-cap firms, we implement an integrated empirical framework combining quantile regression, rolling-window beta estimation, and a Markov-Switching AR (1) model. Our findings reveal pronounced distortions in the beta–return relationship, which becomes non-linear, time-varying, and contingent on latent market regimes. These results challenge the CAPM’s core assumptions of linearity, stationarity, and rational expectations. While the empirical scope centers on U.S. equities, the identified dynamics—rooted in behavioral asymmetries and volatility shocks—are particularly relevant for emerging markets, where such distortions are typically amplified. The study offers a diagnostic framework that may inform risk monitoring, portfolio management, and asset pricing in complex and unstable market environments, including those in emerging economies.

Retail media networks (RMNs) of online retail platforms are revolutionising e-commerce by monetising sellers' search rankings and reshaping co-opetition among online resellers. Yet the influence of RMNs on the relationships and strategic selling decisions of co-opetitive sellers remains underexplored. This study examines an e-commerce setting comprising an online platform, an upstream manufacturer (brand), and a reseller, where the platform determines whether to establish RMN and the manufacturer and reseller operate within a co-opetitive structure. We analyse two distinct selling modes–the reselling mode and the agency mode–to illuminate how RMN impacts selling strategies. First, the platform's decision to establish RMN hinges highly on the selling mode structures and market conditions. Under the reselling mode, the platform cannot always benefit from RMN. Second, based on the rational expectations of RMN establishment strategy, the equilibrium selling mode is jointly impacted by market conditions and selling mode selection power. Both the platform and the manufacturer have a common preference in the agency mode when commission rate is moderate. Third, RMN alters the preferences of the platform and the manufacturer, making the platform more likely to choose the agency mode, but making the manufacturer more likely to choose the reselling mode. When the platform chooses the selling mode, this impact is always beneficial for both the platform and the manufacturer. However, when the manufacturer chooses the selling mode, this impact may lead the platform and the manufacturer into a Stackelberg prisoner's dilemma, resulting in profit losses for both parties.

Abstract Firms with multiple pieces of information can disclose the information concurrently (bundled disclosure) or sequentially (unbundled disclosure). This paper examines the pricing implications of (un)bundled disclosure in a rational expectations equilibrium model. The model considers a firm whose liquidating cash flow consists of two components. Some investors possess private information about one component (e.g., earnings) and all investors are uninformed about the other component (e.g., unexpected events). We analyze three disclosure policies. In bundled disclosure, both cash flow components are disclosed concurrently; in unbundled disclosure, the informed cash flow component is disclosed early, and the uninformed component is disclosed later; and in alternative unbundled disclosure, the uninformed component is disclosed early, and the informed component later. We find that the disclosure policy influences the cost of capital prior to any disclosure through a risk allocation effect and a price informativeness effect. Unbundled disclosure results in a lower cost of capital compared to bundled disclosure, as it improves risk allocation and enhances the informativeness of the stock price prior to any disclosure. However, for alternative unbundled disclosure, the cost of capital can be higher or lower than that of the other disclosure policies. This is because late disclosure of the informed cash flow component alters investors' risk exposure to the noisy supply of shares, thereby influencing the risk allocation and price informativeness effects.

Software is one of the most important assets that needs to be priced in the digital economy. It has emerged as a disruptive technology, with companies primarily valued for their software offerings growing from 2 percent to 13 percent of market share between 1996 and 2023. We document persistent anomalies in growth forecasts and stock returns for software companies, indicating significant deviations from rational expectations over multiple decades. Our findings are consistent with Bayesian investors gradually learning about software’s growing importance, highlighting how markets can be very slow to discern fundamental shifts from transient shocks in noisy data. (JEL D22, G12, G32, L14, L86)

What are consumer sentiment indicators a measure of?

Traditional finance builds its theoretical framework based on the assumption of rational people. However, in the real market, investors' decision-making behaviors often deviate from rational expectations. Behavioral finance, by introducing psychological theories, reveals the irrational characteristics of investors in terms of cognitive biases, emotional influences, and group behaviors. Starting from the theoretical origin of behavioral finance, this article systematically analyzes the irrational performance of investors in the links of information processing, risk perception and decision execution, explores the deep impact of emotional fluctuations, social interaction and cognitive limitations on the decision-making mechanism, and proposes practical paths for optimizing investment decisions. Research shows that understanding the mechanism of irrational decision-making is of great significance for constructing financial theories that are closer to market reality.

This paper reviews the emerging literature on how macroeconomic narratives—systematized, socially agreed-upon stories of the economy—function as signals that shape expectations, impact confidence, and drive collective economic behavior. Based on rational expectations, behavioral economics, signaling theory, narrative economics, and sociological methods, we examine how stories arise, disseminate through multiple channels, and gain strength through contagion and feedback loops. Empirical evidence demonstrates that policy communication stories, media framing, market commentaries, and public discourse can influence consumption, investment, asset prices, and political opinions individually. The literature's primary shortcomings include vagueness of definitions, measurement problems, causality issues, and a lack of cross-cultural and non-crisis research. Future research directions involve conceptual standardization, richer narrative measurement, improved causal inference, channel attribution, and integration into macroeconomic models. The paper concludes with insights into the strategic potential of narrative management for policymakers, market participants, and media outlets, as well as associated risks in policy and practice.

This study investigates the impact of advanced electricity outage announcements on the operational efficiency of small and medium enterprises (SMEs), in Egypt, using profitability as a key performance indicator. Leveraging data from “Transition to Clean Energy Enterprise Survey” and applying the inverse probability-weighted regression adjustment (IPWRA) method to address selection bias, we estimate how outage predictability influences firm outcomes. We find that SMEs receiving advance notice of power disruptions are significantly more likely to achieve higher profitability compared to those without such information. The benefits are most evident among larger firms and sectors such as transportation, financial services, and accommodation, where operational planning is critical. While the policy partially offsets losses from outages, firms in areas with frequent blackouts still face substantial profitability challenges, highlighting the limits of transparency alone. Our findings emphasize that advance announcements enhance SME resilience by enabling adaptive measures, but long-term solutions require complementary infrastructure investments in high-risk regions. The study advocates for policy frameworks centered on transparency and rational expectations, demonstrating how proactive communication in public services can bolster economic resilience amid global uncertainties. These insights are particularly relevant for developing economies seeking to balance immediate crisis management with sustainable energy infrastructure development.

Asymmetries play an important role in many macroeconomic models. We show that assumptions on household and firm expectations play a key role in determining the effects of these asymmetries on macroeconomic outcomes. If households and firms have perfect foresight and hence do not account for the possibility of future shocks, then the implied longer-run averages and distributions for unemployment and inflation can differ significantly from their rational expectations counterparts. We first derive this result analytically under either an asymmetric monetary policy rule or a nonlinear Phillips curve before numerically examining some of the key nonlinearities featured in the recent literature.

ABSTRACTMonetary policy transmission in the benchmark New Keynesian (NK) model hinges on the Full Information Rational Expectations (FIRE) assumption, especially via indirect general equilibrium (GE) effects. This paper relaxes FIRE by introducing noisy information into a Heterogeneous‐Agent NK model with financial frictions. Noisy information dampens amplification by muting GE effects, aligning model dynamics with empirical evidence, and resolving the forward guidance puzzle. It also broadens the determinacy region for policy rules. Finally, I explore belief shocks, showing that transitory “animal spirits” can have persistent effects, offering new insights into the macroeconomic consequences of information frictions.