Essays on Economic Expectations and Monetary Union Heterogeneity

The research contained in this dissertation is concerned with several questions that emerged in the context of the macroeconomic situation of Western economies in the last decade, in particular the apparent disconnect between monetary policy and unemployment on the one hand and inflation on the other. As traditional tools of monetary policy proved ineffective to stabilize the economies of the United States, the Euro Area and other Western countries, the management of economic expectations of the general public, in particular its inflation expectations, became a centerpiece of monetary policy making. This dissertation contributes to the literature on the potential effects of such efforts on consumption behavior of households as well as the capability of central banks to influence inflation expectations and economic expectations more generally in the first place. Furthermore, this research discusses econometric issues that could lead to spuriously flattening Phillips Curve slopes when estimating reduced form regressions of the relationship between inflation and unemployment.