Expectations and perceived causality in fiscal policy: an experimental analysis using real world data
AbstractWe generate observable expectations about fiscal variables through laboratory experiments using real world data from several European countries as stimuli.We estimate an econometric model of individual expectations for fiscal policy, which nests various theories of expectations-forming and encompasses both micro- and macro- economic lines of research on fiscal policy. Agents' expectations are found neither to be consistent with rational nor with purely adaptive expectations. Expectations follow an augmented-adaptive scheme, which embodies the "spend and tax hypothesis" on the relationship between taxes and expenditure to a greater extent than in real world data. We relate this findings to current research on the effects of fiscal policy. Methodological implications of the present approach for experiments in macroeconomics are also discussed.
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Bibliographic InfoPaper provided by Department of Economics, University of Insubria in its series Economics and Quantitative Methods with number qf0224.
Length: 53 pages
Date of creation: Feb 2003
Date of revision:
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Web page: http://www.uninsubria.it/uninsubria/facolta/econo.html
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Experiments; fiscal policy; expectations; causality; cointegration; panel data;
Other versions of this item:
- Bernasconi, Michele & Kirchkamp, Oliver & Paruolo, Paolo, 2003. "Expectations and perceived causality in fiscal policy: an experimental analysis using real world data," Sonderforschungsbereich 504 Publications 03-03, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
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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03/9, Department of Economics, Royal Holloway University of London, revised Dec 2003.
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- Roberto Ricciuti, 2005. "Bringing Macroeconomics into the Lab," Labsi Experimental Economics Laboratory University of Siena 004, University of Siena.
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