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Inflation Expectation Decision and Saving Decision in Heterogeneously Endowed Overlapping Generation Model: An Experimental Evidence from Laboratory

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  • Das, Abhishek
  • Gupta, Gautam

Abstract

In this paper we use a heterogeneously endowed Overlapping Generation model (OLG) in an experimental framework. . In our experimental OLG economy young subjects are asked either to predict the inflation rate for the next period or to decide his/her savings for the current period. We find that for both the decisions neither higher amount of government expenditure nor the higher amount of money supply by monetary authority will move inflation rate towards equilibrium. We also find that that if there is much uncertainty, Friedman Conjecture will not work.

Suggested Citation

  • Das, Abhishek & Gupta, Gautam, 2015. "Inflation Expectation Decision and Saving Decision in Heterogeneously Endowed Overlapping Generation Model: An Experimental Evidence from Laboratory," MPRA Paper 65007, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:65007
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    References listed on IDEAS

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    1. Bernasconi, Michele & Kirchkamp, Oliver, 2000. "Why do monetary policies matter? An experimental study of saving and inflation in an overlapping generations model," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 315-343, October.
    2. Marimon, Ramon & Sunder, Shyam, 1994. "Expectations and Learning under Alternative Monetary Regimes: An Experimental Approach," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(1), pages 131-162, January.
    3. Marimon, Ramon & Sunder, Shyam, 1993. "Indeterminacy of Equilibria in a Hyperinflationary World: Experimental Evidence," Econometrica, Econometric Society, vol. 61(5), pages 1073-1107, September.
    4. Marimon, Ramon & Sunder, Shyam, 1995. "Does a constant money growth rule help stabilize inflation?: experimental evidence," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 43(1), pages 111-156, December.
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    More about this item

    Keywords

    OLG-model; Expectations; Inflation; Stability; Monetary policy; Experiments;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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