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Do fiscal variables affect fiscal expectations? Experiments with real world and lab data

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  • Bernasconi, Michele
  • Kirchkamp, Oliver
  • Paruolo, Paolo

Abstract

We generate observable expectations about fiscal variables through laboratory experiments using real world data from several European countries as stimuli. We compare a VAR model of expectations for data that is presented in a fiscal frame with one for neutrally presented data. We test the validity of the setup and find that participants understand the meaning of the fiscal variables, but also that their ability to perceive the correct characteristics of fiscal policy is limited. Expectations are consistent neither with rational nor with purely adaptive expectations, but instead follow an augmented-adaptive scheme.

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  • Bernasconi, Michele & Kirchkamp, Oliver & Paruolo, Paolo, 2009. "Do fiscal variables affect fiscal expectations? Experiments with real world and lab data," Journal of Economic Behavior & Organization, Elsevier, vol. 70(1-2), pages 253-265, May.
    • Handle: RePEc:eee:jeborg:v:70:y:2009:i:1-2:p:253-265
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    Cited by:

    1. Bernasconi, Michele & Kirchkamp, Oliver & Paruolo, Paolo, 2009. "Do fiscal variables affect fiscal expectations? Experiments with real world and lab data," Journal of Economic Behavior & Organization, Elsevier, vol. 70(1-2), pages 253-265, May.
    2. Roos, Michael W. M. & Luhan, Wolfgang J., 2008. "As if or What? – Expectations and Optimization in a Simple Macroeconomic Environment," Ruhr Economic Papers 55, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    3. Tiziana Assenza & Te Bao & Cars Hommes & Domenico Massaro, 2014. "Experiments on Expectations in Macroeconomics and Finance," Research in Experimental Economics, in: Experiments in Macroeconomics, volume 17, pages 11-70, Emerald Group Publishing Limited.
    4. Geiger, Martin & Luhan, Wolfgang J. & Scharler, Johann, 2016. "When do fiscal consolidations lead to consumption booms? Lessons from a laboratory experiment," Journal of Economic Dynamics and Control, Elsevier, vol. 69(C), pages 1-20.
    5. Gerunov, Anton, 2014. "Критичен Преглед На Основните Подходи За Моделиране На Икономическите Очаквания [A Critical Review of Major Approaches for Modeling Economic Expectations]," MPRA Paper 68797, University Library of Munich, Germany.
    6. Michael W. M. Roos & Wolfgang J. Luhan, 2013. "Information, Learning and Expectations in an Experimental Model Economy," Economica, London School of Economics and Political Science, vol. 80(319), pages 513-531, July.
    7. Luigi Mittone & Matteo Tomaselli, 2019. "Economic Growth and Public Debt: An Experimental Approach in Search of a Confidence Channel," DEM Working Papers 2019/18, Department of Economics and Management.
    8. Michael W.M. Roos & Wolfgang J. Luhan, 2008. "As if or What? – Expectations and Optimization in a Simple Macroeconomic Environment," Ruhr Economic Papers 0055, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
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    More about this item

    Keywords

    Experiments Fiscal policy Expectations Panel data;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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