Gomes, Orlando2017-04-042017-04-042015Gomes, O. (2015). “Sentiment Cyclicality.” AUCO Czech Economic Review, vol. 9, nº 2, pp. 104-134.http://hdl.handle.net/10400.21/6896The paper investigates the dynamics of a model of sentiment switching. The model is built upon rumor propagation theory and it is designed to uncover, for a given population, the social process through which optimistic individuals might become pessimistic or the other way around. The outcome is a scenario of perpetual motion with the shares of optimistic and pessimistic agents varying persistently over time. On a second stage, the cyclical sentiments setup is attached to a mechanism of formation of expectations based on the notion of optimized rationality, leading to a description of the macro economy in which aggregate output and inflation exhibit sentiment driven fluctuations. The proposed model contributes to a recent strand of macroeconomic literature that recovers the Keynesian notions of animal spirits, market sentiments and waves of optimism and pessimism.engsentiments, animal spirits, business cycles, rumor propagation, New-Keynesian macroeconomics, optimized rationalityjournal article