Anticipated Fiscal Policy and Adaptive Learning

Centre for Dynamic Macroeconomic Analysis Working Paper No. 0717

49 Pages Posted: 27 Oct 2007

See all articles by George W. Evans

George W. Evans

University of Oregon - Department of Economics; University of St. Andrews - School of Economics and Finance

Seppo Honkapohja

Centre for Economic Policy Research (CEPR); Aalto University School of Business; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Aalto University - School of Business

Kaushik Mitra

University of St. Andrews - School of Economics and Finance

Multiple version iconThere are 2 versions of this paper

Date Written: August 2007

Abstract

We consider the impact of anticipated policy changes when agents form expectations using adaptive learning rather than rational expectations. To model this we assume that agents combine limited structural knowledge with a standard adaptive learning rule. We analyze these issues using two well-known set-ups, an endowment economy and the Ramsey model. In our set-up there are important deviations from both rational expectations and purely adaptive learning. Our approach could be applied to many macroeconomic frameworks.

Keywords: taxation, expectations, Ramsey model

JEL Classification: E62, D84, E21, E43

Suggested Citation

Evans, George W. and Honkapohja, Seppo and Honkapohja, Seppo and Mitra, Kaushik, Anticipated Fiscal Policy and Adaptive Learning (August 2007). Centre for Dynamic Macroeconomic Analysis Working Paper No. 0717, Available at SSRN: https://ssrn.com/abstract=1024755

George W. Evans

University of Oregon - Department of Economics ( email )

1285 University of Oregon
Eugene, OR 97403
United States
541-346-4662 (Phone)
541-346-1243 (Fax)

University of St. Andrews - School of Economics and Finance ( email )

The Scores, Castlecliff
St. Andrews, Fife KY16 8RD
United Kingdom
44-1334-462435 (Phone)

HOME PAGE: http://www.st-andrews.ac.uk/economics/staff/pages.g.evans.shtml

Seppo Honkapohja

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Aalto University School of Business ( email )

, PO Box 21210
Aalto FI-00076
Finland

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Aalto University - School of Business

Finland

Kaushik Mitra (Contact Author)

University of St. Andrews - School of Economics and Finance ( email )

Castlecliffe
Saint Andrews, Fife KY16 9SS
United Kingdom

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