Bounded rationality and heterogeneous expectations in macroeconomics

This thesis studies the effect of individual bounded rationality on aggregate macroeconomic dynamics. Boundedly rational agents are specified as using simple heuristics in their decision making. An important aspect of the type of bounded rationality described in this thesis is that the population of agents is heterogeneous, that is, actors can choose from different rules to solve the same economic problem. The set of rules is disciplined by an evolutionary selection mechanism where the best performing rule, measured according to some fitness metric, attracts the higher number of agents. An important role in triggering switching between rules is played by the dynamic feedback between individual expectations of macroeconomic variables and their aggregate realizations. The macroeconomic models with heuristics switching developed in the thesis are used to evaluate standard policy advices and to explain aggregate time series data as well as experimental data on individual expectations and aggregate macro behavior.