Experimental Evidence on The Persistence of Output and Inflation  

Oleh:

Adam, Klaus

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Economic Journal (EBSCO) vol. 117 no. 520 (Apr. 2007), page 603-636.
Topik: inflation; experiments; output; inflation; rational expectations; equilibrium
Fulltext: 603.pdf (629.82KB)

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Perpustakaan Pusat (Semanggi) Nomor Panggil: EE28.25 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

This article presents experimental evidence from a monetary sticky price economy in which output and inflation depend on expected future inflation. Rational inflation expectations do not allow for persistent deviations of output and inflation following a monetary shock. In the experimental sessions, however, output and inflation display considerable persistence and regular cyclical patterns. This emerges because subjects' inflation expectations fail to be captured by rational expectations functions. Instead, a Restricted Perceptions Equilibrium (RPE), which assumes that agents use optimal but 'simple' forecast functions, describes subjects' inflation expectations surprisingly well and explains the observed behaviour of output and inflation.

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