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Econometric Estimation Of Foresight: Tax Policy And Investment In The United States

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  • Douglas G. Steigerwald
  • Charles Stuart

Abstract

We develop a method for measuring the foresight agents have. We first dichotomize an agent's information at current date t into knowledge up to date t + f and expectations after t + f. We then form a residual-based test statistic that allows us to compare prediction errors for econometric models based on different values of f. We illustrate the method, examining investment around tax reforms to measure the foresight firms have about tax policy. In this illustration, current investment appears to reflect currently available information but little foresight other than foresight of enacted policy changes. © 2001 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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Bibliographic Info

Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 79 (1997)
Issue (Month): 1 (February)
Pages: 32-40

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Handle: RePEc:tpr:restat:v:79:y:1997:i:1:p:32-40

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Cited by:
  1. Lanne, Markku & Saikkonen, Pentti, 2013. "Noncausal Vector Autoregression," Econometric Theory, Cambridge University Press, vol. 29(03), pages 447-481, June.
  2. Fernando, Estrada, 2010. "A reading Hayek on power to tax," MPRA Paper 21526, University Library of Munich, Germany.
  3. Eric M. Leeper, 2009. "Anchoring fiscal expectations," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 72, pages 17-42, September.
  4. Binder, Michael & Pesaran, Hashem, 2000. "Solution of finite-horizon multivariate linear rational expectations models and sparse linear systems," Journal of Economic Dynamics and Control, Elsevier, vol. 24(3), pages 325-346, March.
  5. Estrada, Fernando, 2010. "The progressive tax," MPRA Paper 34971, University Library of Munich, Germany, revised Nov 2011.
  6. Fernando Estrada, 2011. "The Power to Tax: A Lecture of Hayek," Economic Research Guardian, Weissberg Publishing, vol. 1(1), pages 2-14, September.
  7. Todd B. Walker & Shu-Chun Susan Yang & Eric M. Leeper, 2008. "Fiscal Foresight: Analytical Issues," 2008 Meeting Papers 786, Society for Economic Dynamics.
  8. Austan Goolsbee, 1997. "Investment Tax Incentives, Prices, and the Supply of Capital Goods," NBER Working Papers 6192, National Bureau of Economic Research, Inc.
  9. Estrada, Fernando, 2010. "Política tributaria y economía fiscal La posición Hayek (1959, 1979) con comentarios de Brenann/Buchanan (1980)
    [Fiscal tax policy and economy]
    ," MPRA Paper 20094, University Library of Munich, Germany.
  10. Eric M. Leeper, 2003. "Fiscal Policy and Inflation: Pondering the Imponderables," NBER Working Papers 9506, National Bureau of Economic Research, Inc.
  11. Shu-Chun Susan Yang, 2007. "A Chronology Of Postwar U.S. Federal Income Tax Policy," Caepr Working Papers 2007-021, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  12. Estrada, Fernando, 2011. "The power to tax," MPRA Paper 33203, University Library of Munich, Germany.
  13. Hjalmar Boehm & Michael Funke, 2000. "Optimal Investment Strategies under Demand and Tax Policy Uncertainty," CESifo Working Paper Series 311, CESifo Group Munich.
  14. Susan Yang, Shu-Chun, 2005. "Quantifying tax effects under policy foresight," Journal of Monetary Economics, Elsevier, vol. 52(8), pages 1557-1568, November.

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