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Do fiscal variables affect fiscal expectations? Experiments with real world and lab data

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  • Bernasconi, Michele
  • Kirchkamp, Oliver
  • Paruolo, Paolo

Abstract

We generate observable expectations about fiscal variables through laboratory experiments using real world data from several European countries as stimuli. We compare a VAR model of expectations for data that is presented in a fiscal frame with one for neutrally presented data. We test the validity of the setup and find that participants understand the meaning of the fiscal variables, but also that their ability to perceive the correct characteristics of fiscal policy is limited. Expectations are consistent neither with rational nor with purely adaptive expectations, but instead follow an augmented-adaptive scheme.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 70 (2009)
Issue (Month): 1-2 (May)
Pages: 253-265

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Handle: RePEc:eee:jeborg:v:70:y:2009:i:1-2:p:253-265

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Web page: http://www.elsevier.com/locate/jebo

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Keywords: Experiments Fiscal policy Expectations Panel data;

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Cited by:
  1. Michael W.M. Roos & Wolfgang J. Luhan, 2008. "As if or What? – Expectations and Optimization in a Simple Macroeconomic Environment," Ruhr Economic Papers 0055, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  2. Michael W.M. Roos & Wolfgang J. Luhan, 2008. "Are Expectations Formed by the Anchoring-and-adjustment Heuristic? – An Experimental Investigation," Ruhr Economic Papers 0054, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  3. Michael W. M. Roos & Ulrich Schmidt, 2012. "The Importance of Time‐Series Extrapolation for Macroeconomic Expectations," German Economic Review, Verein für Socialpolitik, vol. 13(2), pages 196-210, 05.
  4. John Duffy, 2008. "Macroeconomics: A Survey of Laboratory Research," Working Papers 334, University of Pittsburgh, Department of Economics, revised Mar 2008.

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