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

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Author Info
Bernasconi, Michele
Kirchkamp, Oliver
Paruolo, Paolo

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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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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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Keywords: Experiments Fiscal policy Expectations Panel data;

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. 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. [Downloadable!]
  2. Fiore, Annamaria, 2009. "Experimental Economics: Some Methodological Notes," MPRA Paper 12498, University Library of Munich, Germany. [Downloadable!]
  3. John Duffy, 2008. "Macroeconomics: A Survey of Laboratory Research," Working Papers 334, University of Pittsburgh, Department of Economics, revised Mar 2008. [Downloadable!]
  4. 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. [Downloadable!]
  5. Oliver Kirchkamp & Michele Bernasconi & Paolo Paruolo, 2006. "Do fiscal variables affect fiscal expectations? Experiments with real world and lab data," CRIEFF Discussion Papers 0608, Centre for Research into Industry, Enterprise, Finance and the Firm. [Downloadable!]
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