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Anticipated Fiscal Policy and Adaptive Learning

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Author Info
George W. Evans () (University of Oregon Economics Department)
Seppo Honkapohja () (University of Cambridge)
Kaushik Mitra (University of St Andrews)

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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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Publisher Info
Paper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number 2007-5.

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Length: 44
Date of creation: 18 Feb 2007
Date of revision: 18 Feb 2007
Handle: RePEc:ore:uoecwp:2007-5

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Related research
Keywords: Taxation expectations Ramsey model

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Find related papers by JEL classification:
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
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

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  1. 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)
  2. Branch, William A. & Evans, George W., 2006. "A simple recursive forecasting model," Economics Letters, Elsevier, vol. 91(2), pages 158-166, May. [Downloadable!] (restricted)
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  3. 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:
  4. repec:cup:macdyn:v:5:y:2001:i:2:p:272-302 is not listed on IDEAS
  5. 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:
  6. Stefano Eusepi & Bruce Preston, 2007. "Central Bank Communication and Expectations Stabilization," NBER Working Papers 13259, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1, pages 19-46. [Downloadable!] (restricted)
  8. 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)
  9. 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)
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  10. 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)
  11. 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.
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  12. 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)
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  13. Giannitsarou, Chryssi, 2006. "Supply-side reforms and learning dynamics," Journal of Monetary Economics, Elsevier, vol. 53(2), pages 291-309, March. [Downloadable!] (restricted)
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  14. 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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