This paper attempts to identify, in a framework deliberately stripped of unnecessary technicalities, some of the basic reasons why adaptive learning may or may not lead to stability and convergence ...to self-fulfilling expectations in large socioeconomic systems where no agent, or collection of agents, can act to manipulate macroeconomic outcomes. It is shown that if agents are somewhat uncertain about the local stability of the system, and are accordingly ready to extrapolate a large range of regularities (trends) that may show up in past small deviations from equilibrium, including divergent ones, the learning dynamics is locally divergent. On the other hand, if agents are fairly sure of the local stability of the system, and extrapolate only convergent trends out of small past deviations from equilibrium, one may get local stability. This "uncertainty principle" does show up in a wide variety of contexts: smooth or discontinuous, finite or infinite memory learning rules, error learning, recursive least squares, Bayesian learning.
The transcript of a panel discussion marking the 50th anniversary of John Muth's “Rational Expectations and the Theory of Price Movements” (
Econometrica
1961). The panel consisted of Michael Lovell, ...Robert Lucas, Dale Mortensen, Robert Shiller, and Neil Wallace. The discussion was moderated by Kevin Hoover and Warren Young. The panel touched on a wide variety of issues related to the rational-expectations hypothesis, including its history, starting with Muth's work at Carnegie Tech; its methodological role; applications to policy; its relationship to behavioral economics; its role in the recent financial crisis; and its likely future.
The panel discussion was held in a session sponsored by the History of Economics Society at the Allied Social Sciences Association (ASSA) meetings in the Capitol 1 Room of the Hyatt Regency Hotel in Denver, Colorado.
How strong is the interdependence between the macroeconomy and the stock market?
This paper estimates a New Keynesian general equilibrium model, which is extended to include a wealth effect from ...asset price fluctuations to consumption, to assess the quantitative importance of interactions among the stock market, macroeconomic variables, and monetary policy.
The paper relaxes the assumption of rational expectations and assumes that economic agents learn over time and form near-rational expectations from their perceived model of the economy. The stock market, therefore, affects the economy through two channels: through a traditional “wealth effect” and through its impact on agents' expectations. Monetary policy decisions also affect and are potentially affected by the stock market.
The empirical results show that the direct wealth effect is modest, but asset price fluctuations have important effects on future output expectations. Through this expectational channel, shocks in the stock market can account for a large, but varying, portion of output fluctuations.
Expectations in Experiments Wagener, Florian
Annual review of economics,
01/2014, Letnik:
6, Številka:
1
Journal Article
Recenzirano
Odprti dostop
The rational expectations hypothesis is one of the cornerstones of current economic theorizing. This review discusses a number of experiments that focus on expectation formation by human subjects in ...a number of learning-to-forecast experiments and analyzes the implications for the rational expectations hypothesis. In these experiments, most agents are rational in an operational sense, and their expectations coordinate quickly, but not necessarily on the rational expectations value. In several situations, the homogeneous rational expectations hypothesis of Lucas and Prescott poorly describes the expectational dynamics and is outperformed by other hypotheses. But even in those situations in which the hypothesis gives a good description, it is more likely that coordination on rational values is brought about by the institutional structure of the market rather than the rationality of the agents.
Record grain supplies combined with insufficient grain export capacity in the 2013–14 and 2014–15 crop years resulted in depressed Western Canadian grain prices costing producers several billion ...dollars. The exceptional size of the crop and the harsh winter weather contributing to this costly event raise an important question as to whether additional investment in export capacity is warranted. This study systematically assesses the need for additional grain export capacity in Western Canada. Somewhat conservative grain production forecasts and rational expectations storage are used within a spatial mathematical programming model to simulate a competitive market, moving grain to export positions. We find in the absence of additional export capacity there will be increasingly frequent periods of costly congestion. A 10 million tonnes (Mt) (5 Mt) improvement in both rail and West Coast capacity implies $9.2 billion ($6.0 billion) of cost‐saving benefits for the producers over the 2016–25 period. While these estimates are sensitive to future realized production levels, their magnitude suggests that innovation to increase export capacity is economically important for grain producers in Western Canada.
Des approvisionnements records de grains combinés à une capacité exportatrice insuffisante de ces derniers en 2013–14 et en 2014–15 ont engendré le bas prix du grain de l'Ouest canadien représentant une perte de milliards de dollars pour les producteurs. La production exceptionnelle et l'hiver particulièrement rude ont contribué à cet événement coûteux et soulèvent une question importante concernant le besoin pour des investissements additionnels en capacité exportatrice. Cette étude évalue systématiquement le besoin pour une capacité exportatrice accrue des céréales provenant de l'Ouest canadien. Les prévisions relativement prudentes de production de grains et l'anticipation rationnelle de stockage servent dans le cadre d'un modèle de programmation mathématique spatiale pour simuler un marché compétitif, transportant le grain vers les points d'exportation. Les trouvailles indiquent qu'en l'absence de capacité supplémentaire exportatrice, surviendront des périodes de plus en plus fréquentes de congestion coûteuse. Une amélioration de 10 Mt (5 Mt) à la capacité ferroviaire et de la Côte Ouest suppose des réductions de coûts à la hauteur de 9,2 milliards de dollars (6 milliards de dollars) pour les producteurs pour la période entre 2016 et 2025. Ces estimations étant liées à l'atteinte de futurs niveaux de production, leur importance suggère que l'innovation en vue d'accroître la capacité exportatrice s'avère économiquement essentielle pour les producteurs céréaliers de l'ouest du Canada.
We use the Markov-switching model based on Hamilton (1990) among others. The non-explicit intervention of the Central Reserve Bank changes the expectations of economic agents. This change in ...expectations clearly shows that the public is aware of non-explicit interventions in a dollarized economy and said interventions have been altering the expectations of economic agents in terms of the foreign exchange market. We conclude that market participants assume that the Central Reserve Bank is more efficient in reducing volatility in periods in which the domestic currency appreciates rather than depreciates. The results show that the Markov-switching model behaves more than satisfactorily in the sample period but less so in periods of extreme volatility such as the recent sub-prime crisis. Central Bank's forex interventions are policy instruments that can be followed and interpreted by the public.
Although intuitive processes are critical for effective strategic decision making, there is little in the way of applied research on the topic. Apart from many popularized treatments of intuition in ...the literature today, there are only a handful of serious scholarly works on the subject. The majority of them are essentially theoretical in nature; field research in management settings is virtually nonexistent. This study examined this neglected but important process in strategic decision making. We surveyed senior managers of companies representing computer, banking, and utility industries in the United States and found that intuitive processes are used often in organizational decision making. Use of intuitive synthesis was found to be positively associated with organizational performance in an unstable environment, but negatively so in a stable environment.
Following World War II, the Australian Wheat Board was established as a statutory marketing authority to be the sole marketer of the Australian wheat crop. This was intended to provide wheat farmers ...with security and stability, two goals that had characterised the approach of the Australian government towards agricultural policy in the 1950s and 1960s (Higgins and Lockie 2002; Botterill 2012a). It was an approach to agricultural policy that collectivised risk while protecting agricultural producers from fluctuating prices in global markets. Wheat was pooled and the returns from its sale were redistributed evenly among growers. However, the situation changed significantly from the 1970s as deregulation became an increasingly dominant emphasis in Australian agricultural policy. The statutory marketing authorities were dismantled and commodity markets such as Australian domestic wheat were deregulated. The process accelerated during the 1980s with the increasing influence of ‘economic rationalism’ and free market logics on public policies (Tonts and Haslam-McKenzie 2005; Pritchard 2005; Banks 2005; Cheshire and Lawrence 2005; Botterill 2012a, 2012b, 2011). The process continued apace during the following decade.
Celotno besedilo
Dostopno za:
CEKLJ, DOBA, IZUM, KILJ, NUK, ODKLJ, PILJ, PNG, SAZU, SIK, UILJ, UKNU, UL, UM, UPUK
499.
Identifying fiscal inflation De Graeve, Ferre; Queijo von Heideken, Virginia
European economic review,
11/2015, Letnik:
80
Journal Article
Recenzirano
Odprti dostop
Fiscal theorists warn about the risk of future inflation as a consequence of fiscal imbalances in the US. Because actual inflation remains historically low and data on inflation expectations do not ...corroborate such risks, warnings for fiscal inflation are often ignored in policy and academic circles. This paper shows that a canonical NK-DSGE model enables identifying an anticipated component of inflation expectations that is closely related to fiscal policy. Estimation results suggest that fiscal inflation concerns have induced a 1.6%-points increase in long-run inflation since 2001. The model also rationalizes why data on inflation expectations do not reveal such concerns outright.
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