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Do fiscal variables affect fiscal expectations? Experiments with real world and lab data

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  • Oliver Kirchkamp
  • Michele Bernasconi
  • Paolo Paruolo

Abstract

We generate observable expectations about fiscal variables through laboratory experiments using real world data from several European countries as stimuli. We compare a VAR model of expectations for data which is presented in a fiscal frame with one for neutrally presented data. We find that participants understand the meaning of the fiscal variables, but also that their ability to perceive the correct characteristics of fiscal policy is limited. We tie the VAR analysis to specific models of forming expectations. We find that agents’ expectations are neither consistent with rational nor with purely adaptive expectations but, instead, follow an augmented-adaptive scheme

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Bibliographic Info

Paper provided by Centre for Research into Industry, Enterprise, Finance and the Firm in its series CRIEFF Discussion Papers with number 0608.

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Date of creation: Jun 2006
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Handle: RePEc:san:crieff:0608

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Keywords: Experiments; fiscal policy; expectations; causality; cointegration; panel data.;

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Cited by:
  1. Oliver Kirchkamp & Michele Bernasconi & Paolo Paruolo, 2006. "Do fiscal variables affect fiscal expectations? Experiments with real world and lab data," CRIEFF Discussion Papers 0608, Centre for Research into Industry, Enterprise, Finance and the Firm.
  2. Michael W.M. Roos & Wolfgang J. Luhan, 2008. "As if or What? – Expectations and Optimization in a Simple Macroeconomic Environment," Ruhr Economic Papers 0055, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  3. Michael W.M. Roos & Wolfgang J. Luhan, 2008. "Are Expectations Formed by the Anchoring-and-adjustment Heuristic? – An Experimental Investigation," Ruhr Economic Papers 0054, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  4. Michael W. M. Roos & Ulrich Schmidt, 2012. "The Importance of Time‐Series Extrapolation for Macroeconomic Expectations," German Economic Review, Verein für Socialpolitik, vol. 13(2), pages 196-210, 05.
  5. Fiore, Annamaria, 2009. "Experimental Economics: Some Methodological Notes," MPRA Paper 12498, University Library of Munich, Germany.
  6. John Duffy, 2008. "Macroeconomics: A Survey of Laboratory Research," Working Papers 334, University of Pittsburgh, Department of Economics, revised Jun 2014.

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