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Expectations and perceived causality in fiscal policy: an experimental analysis using real world data

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Author Info
Bernasconi, Michele () (Università dell'Insubria)
Kirchkamp, Oliver () (Sonderforschungsbereich 504)
Paruolo, Paolo () (University of Insubria)

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Abstract

We 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

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Publisher Info
Paper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number 03-03.

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Length: 52 pages
Date of creation: 12 Feb 2003
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Handle: RePEc:xrs:sfbmaa:03-03

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Related research
Keywords: Experiments fiscal policy expectations causality cointegration panel data

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Find related papers by JEL classification:
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
H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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