Effects of inflation expectations on macroeconomic dynamics: Extrapolative versus regressive expectations

Arbeitspapier

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.

Angaben zum Objekt

• Sprache: Englisch
• ISBN: 978-3-931052-76-8

Verweise und Beziehungen

• Erschienen in: Series: BERG Working Paper Series on Government and Growth ; No. 68

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Existence and Stability Conditions of Equilibrium ; Computational Techniques; Simulation Modeling ; Price Level; Inflation; Deflation ; Business Fluctuations; Cycles
• Thema: Extrapolative and regressive expectations ; dynamic predictor selection ; macroeconomic dynamics ; nonlinearities and chaos ; bifurcation analysis ; Inflationserwartung ; Geldtheorie ; Makroökonomik ; Dynamisches Modell ; Chaostheorie ; Theorie

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Lines, Marji ; Westerhoff, Frank
• Ereignis: Veröffentlichung
• (wer): Bamberg University, Bamberg Economic Research Group on Government and Growth (BERG)
• (wo): Bamberg
• (wann): 2009

Weitere Informationen

• Handle: http://hdl.handle.net/10419/38825
• Letzte Aktualisierung: 10.03.2025, 11:46 MEZ