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Abstract

The purpose of this thesis is to investigate the role of expectations formation in agent-based

and stock-flow consistent macroeconomic models. While there have been considerable advances in the development of such models, research on the formation and role of beliefs and

expectations within them remains underdeveloped. The thesis consists of three papers, each

of which focuses on expectations formation in one particular economic sector and presents

a range of experiments concerning the variation of expectations formation mechanisms, belief and sentiment dynamics, as well as policy applications. The thesis demonstrates the

potentially strong influence of agents' expectations on macroeconomic volatility and shows

that depending on their specification as well as the economic environment, expectations can

be both a stabilising and destabilising factor. Moreover, through the wide range of policy

experiments conducted, it serves to emphasise the important role of stabilisation policies in

systems exhibiting endogenous fluctuations and chapter 4 in particular highlights the potential dependence of policy effectiveness on expectations. At the same time, some of the obtained results caution that in complex systems, policy interventions must be carefully calibrated lest they themselves become a source of instability.