Anticipated Fiscal Policy and Adaptive Learning

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Anticipated Fiscal Policy and Adaptive Learning

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Evans, George W
Honkapohja, Seppo
Mitra, Kaushik

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Abstract

We consider the impact of anticipated policy changes when agents form expectations using adaptive learning rather than rational expectations. To model this we assume that agents combine limited structural knowledge with a standard adaptive learning rule. We analyze these issues using two well-known set-ups, an endowment economy and the Ramsey model. In our set-up there are important deviations from both rational expectations and purely adaptive learning. Our approach could be applied to many macroeconomic frameworks.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6216.

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Date of creation: Mar 2007
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Handle: RePEc:cpr:ceprdp:6216

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Paper
- George W. Evans & Seppo Honkapohja & Kaushik Mitra, 2007. "Anticipated Fiscal Policy and Adaptive Learning," University of Oregon Economics Department Working Papers 2007-5, University of Oregon Economics Department, revised 18 Feb 2007. [Downloadable!]
- George Evans & Seppo Honkapohja & Kaushik Mitra, 2007. " Anticipated Fiscal Policy and Adaptive Learning," CDMA Working Paper Series 0717, Centre for Dynamic Macroeconomic Analysis. [Downloadable!]
- Evans, G.W. & Honkapohja ,S. & Mitra, K., 2007. "Anticipated Fiscal Policy and Adaptive Learning," Cambridge Working Papers in Economics 0705, Faculty of Economics, University of Cambridge. [Downloadable!]

Find related papers by JEL classification:
D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

This paper has been announced in the following NEP Reports:

NEP-ALL-2007-03-31 (All new papers)
NEP-CBA-2007-03-31 (Central Banking)
NEP-KNM-2007-03-31 (Knowledge Management & Knowledge Economy)
NEP-MAC-2007-03-31 (Macroeconomics)
NEP-PBE-2007-03-31 (Public Economics)

References listed on IDEAS
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.:

Evans, George W & Honkapohja, Seppo & Marimon, Ramon, 1996. "Convergence in Monetary Inflation Models with Heterogeneous Learning Rules," CEPR Discussion Papers 1310, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Branch, William A. & Evans, George W., 2006. "A simple recursive forecasting model," Economics Letters, Elsevier, vol. 91(2), pages 158-166, May. [Downloadable!] (restricted)
Other versions:
- Wiliam Branch & George W. Evans, 2005. "A Simple Recursive Forecasting Model," University of Oregon Economics Department Working Papers 2005-3, University of Oregon Economics Department, revised 01 Feb 2005. [Downloadable!]
Evans, George W & Honkapohja, Seppo, 1998. "Economic Dynamics with Learning: New Stability Results," Review of Economic Studies, Blackwell Publishing, vol. 65(1), pages 23-44, January. [Downloadable!] (restricted)
Other versions:
- Honkapohja, Seppo & Evans, George W., 1996. "Economic Dynamics with Learning: New Stability Results," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH.
- George W. Evans & Seppo Honkapohja, . "Economic Dynamics with Learning: New Stability Results," Computing in Economics and Finance 1997 51, Society for Computational Economics. [Downloadable!]
repec:cup:macdyn:v:5:y:2001:i:2:p:272-302 is not listed on IDEAS
Fair, Ray C & Taylor, John B, 1983. "Solution and Maximum Likelihood Estimation of Dynamic Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 51(4), pages 1169-85, July. [Downloadable!] (restricted)
Other versions:
- Ray C. Fair & John B. Taylor, 1980. "Solution and Maximum Likelihood Estimation of Dynamic Nonlinear RationalExpectations Models," NBER Technical Working Papers 0005, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
- Ray C. Fair & John B. Taylor, 1980. "Solution and Maximum Likelihood Estimation of Dynamic Nonlinear Rational Expectations Models," Cowles Foundation Discussion Papers 564, Cowles Foundation, Yale University. [Downloadable!]
Stefano Eusepi & Bruce Preston, 2007. "Central Bank Communication and Expectations Stabilization," NBER Working Papers 13259, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Stefano Eusepi & Bruce Preston, 2007. "Central Bank Communication and Expectations Stabilization," Discussion Papers 0708-10, Columbia University, Department of Economics. [Downloadable!]
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Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1, pages 19-46. [Downloadable!] (restricted)
Evans, Geroge W & Honkapohja, Seppo & Romer, Paul, 1998. "Growth Cycles," American Economic Review, American Economic Association, vol. 88(3), pages 495-515, June. [Downloadable!] (restricted)
Other versions:
- Paul Romer & George Evans & Seppo Hokapohja, . "Growth Cycles," Home Pages _001, Stanford University. [Downloadable!]
- George Evans & Seppo Honkapohja & Paul Romer, 1996. "Growth Cycles," NBER Working Papers 5659, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Evans, George W. & Ramey, Garey, 2006. "Adaptive expectations, underparameterization and the Lucas critique," Journal of Monetary Economics, Elsevier, vol. 53(2), pages 249-264, March. [Downloadable!] (restricted)
Other versions:
- George W. Evans & Garey Ramey, 2001. "Adaptive Expectations, Underparameterization and the Lucas Critique," University of California at San Diego, Economics Working Paper Series 2001-11, Department of Economics, UC San Diego. [Downloadable!]
- George W. Evans & Garey Ramey, 2001. ""Adaptive Expectations, Underparameterization and the Lucas Critique," University of Oregon Economics Department Working Papers 2001-8, University of Oregon Economics Department, revised 01 Dec 2004. [Downloadable!]
Evans, George W & Ramey, Garey, 1992. "Expectation Calculation and Macroeconomic Dynamics," American Economic Review, American Economic Association, vol. 82(1), pages 207-24, March. [Downloadable!] (restricted)
Cho, In-Koo & Williams, Noah & Sargent, Thomas J, 2002. "Escaping Nash Inflation," Review of Economic Studies, Blackwell Publishing, vol. 69(1), pages 1-40, January.
Other versions:
- In-Koo Cho & Thomas J. Sargent, 2000. "Escaping Nash inflation," Working Paper Series 23, European Central Bank. [Downloadable!]
- Andrea Gerali & Francesco Lippi, 2002. "Matlab codes for escape dynamics," QM&RBC Codes 71, Quantitative Macroeconomics & Real Business Cycles. [Downloadable!]
Albert Marcet & Juan P. Nicolini, 2003. "Recurrent Hyperinflations and Learning," American Economic Review, American Economic Association, vol. 93(5), pages 1476-1498, December. [Downloadable!] (restricted)
Other versions:
- Albert Marcet & Juan P. Nicolini, 1995. "Recurrent Hyperinflations and Learning," Economics Working Papers 244, Department of Economics and Business, Universitat Pompeu Fabra, revised Nov 2001. [Downloadable!]
- Marcet, A. & Nicolini, J.P., 1997. "Recurrent Hyperinflations and Learning," Papers 9721, Centro de Estudios Monetarios Y Financieros-.
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Giannitsarou, Chryssi, 2006. "Supply-side reforms and learning dynamics," Journal of Monetary Economics, Elsevier, vol. 53(2), pages 291-309, March. [Downloadable!] (restricted)
Other versions:
- Chryssi Giannitsarou, 2004. "Supply-side reforms and learning dynamics," Money Macro and Finance (MMF) Research Group Conference 2003 36, Money Macro and Finance Research Group. [Downloadable!]
James Bullard & John Duffy, 1999. "Learning and Excess Volatility," Computing in Economics and Finance 1999 224, Society for Computational Economics.
Other versions:
- James Bullard & John Duffy, 1998. "Learning and excess volatility," Working Papers 1998-016, Federal Reserve Bank of St. Louis. [Downloadable!]
Sargent, Thomas J & Wallace, Neil, 1973. "Rational Expectations and the Dynamics of Hyperinflation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(2), pages 328-50, June. [Downloadable!] (restricted)

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