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

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  • Bernasconi, Michele

    (Università dell'Insubria)

  • Kirchkamp, Oliver

    (Sonderforschungsbereich 504)

  • Paruolo, Paolo

    (University of Insubria)

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

Suggested Citation

  • 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.
    • Handle: RePEc:xrs:sfbmaa:03-03
    Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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    1. Ricciuti, Roberto, 2008. "Bringing macroeconomics into the lab," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 216-237, March.

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    More about this item

    Keywords

    Experiments; fiscal policy; expectations; causality; cointegration; panel data;
    All these keywords.

    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; Modern Monetary Theory
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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