HEURISTIC EXPECTATION FORMATION AND BUSINESS CYCLES: A SIMPLE LINEAR MODEL
We develop a Keynesian business cycle model to study how extrapolative and regressive expectation formation rules may affect fluctuations in economic activity. We find that simple expectation formation rules may have an impact on the level and the stability of the equilibrium income, the size of the multiplier and the resulting adjustment process after an exogenous shocks. Our model also reveals that national income may be influenced by how agents perceive their long-run average income. Copyright © 2007 The Author; Journal compilation © 2007 Blackwell Publishing Ltd.
Year of publication: |
2008
|
---|---|
Authors: | Westerhoff, Frank H. |
Published in: |
Metroeconomica. - Wiley Blackwell, ISSN 0026-1386. - Vol. 59.2008, 1, p. 47-56
|
Publisher: |
Wiley Blackwell |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Exchange Rate Dynamics: A Nonlinear Survey
Westerhoff, Frank H.,
-
Greed, fear and stock market dynamics
Westerhoff, Frank H., (2004)
-
The Use of Agent-Based Financial Market Models to Test the Effectiveness of Regulatory Policies
Westerhoff, Frank H., (2008)
- More ...