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Expectation Formation in a New Keynesian Economy: Evidence from a Laboratory Experiment

Author

Listed:
  • Abhishek Das

    (Jadavpur University)

  • Arpita Ghose

    (Jadavpur University)

  • Gautam Gupta

    (Jadavpur University)

Abstract

This paper discusses an experimental study on the formation of expectation within a New Keynesian macroeconomic framework. The novelty of this paper (one of the earlier paper) is that each subject was asked to forecast both the inflation rate and output gap at the same time, which is an improvement over the existing literature. We find a lot of heterogeneity in expectation formation and also the model switching nature by the subjects.

Suggested Citation

  • Abhishek Das & Arpita Ghose & Gautam Gupta, 2018. "Expectation Formation in a New Keynesian Economy: Evidence from a Laboratory Experiment," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 9(1), pages 17-39, March.
    • Handle: RePEc:spr:jknowl:v:9:y:2018:i:1:d:10.1007_s13132-015-0314-z
    DOI: 10.1007/s13132-015-0314-z
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    References listed on IDEAS

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    More about this item

    Keywords

    Experimental economics; Inflation expectations; Output gap expectation; New Keynesian model; Taylor rule;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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