Expectations and Economic Fluctuations: An Analysis Using Survey Data

They find that changes in expected future economic activity are a quantitatively important driver of economic fluctuations: A perception that good times are ahead typically leads to a significant rise in current measures of economic activity and inflation. The authors also find that the short-term interest rate rises in response to expectations of good times as monetary policy tightens. Their results provide quantitative evidence on the importance of expectations-driven business cycles and on the role that monetary policy plays in shaping them.