Effects of inflation expectations on macroeconomic dynamics: extrapolative versus regressive expectations (BERG Working Paper Series)

Westerhoff, Frank; Lines, Marji

ISBN 10 : 3931052761 ISBN 13 : 9783931052768

Editeur : Universität Bamberg Fachgruppe VWL, 2009

Synopsis

In this paper we integrate heterogeneous inflation expectations into a simple monetary model. Guided by empirical evidence we assume that boundedly rational agents, selecting between extrapolative and regressive forecasting rules to predict the future inflation rate, prefer rules that have produced low prediction errors in the past. We show that integrating this behavioral expectation formation process into the monetary model leads to the possibility of endogenous macroeconomic dynamics. For instance, our model replicates certain empirical regularities such as irregular growth cycles or inflation persistence. Moreover, we observe multi-stability via a Chenciner bifurcation.

Détails de l'édition

• Éditeur: Universität Bamberg Fachgruppe VWL
• Date d'édition: 2009
• Langue: anglais
• ISBN 10: 3931052761
• ISBN 13: 9783931052768
• Reliure: Broschüre
• Numéro d'édition: 1
• Nombre de pages: 38
• Coordonnées du fabricant: non disponible
• Personne responsable: Buchpark GmbH; gpsr@buchpark.de; ; Krügerweg 1; Trebbin; Brandenburg; 14959; Allemagne