AbstractIn modeling expectation formation, economic agents are usually viewed as forming expectations adaptively or in accordance with some rationality postulate. We offer an alternative nonlinear model where agents exchange their opinions and information with each other. Such a model yields multiple equilibria, or attracting distributions, that are persistent but subject to sudden large jumps. Using German Federal Statistical Office economic indicators and German IFO Poll expectational data, we show that this kind of model performs well in simulation experiments. Focusing upon producers' expectations in the consumption goods sector, we also discover evidence that structural change in the interactive process occurred over the period of investigation (1970-1998). Specifically, interactions in expectation formation seem to have become less important over time.
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Bibliographic InfoArticle provided by Springer in its journal Journal of Evolutionary Economics.
Volume (Year): 12 (2002)
Issue (Month): 4 ()
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- Bell, William Paul, 2008. "Adaptive Interactive Profit Expectations and Small World Networks," MPRA Paper 37924, University Library of Munich, Germany.
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