Anticipated fiscal policy and adaptive learning |
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Authors: | George W. Evans Seppo Honkapohja |
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Affiliation: | a University of Oregon, USA b School of Economics and Finance, University of St Andrews, Castlecliffe, The Scores, St Andrews, Fife KY16 9AL, UK c Bank of Finland, Finland |
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Abstract: | The impact of anticipated policy changes when agents form expectations using adaptive learning rather than rational expectations is considered. Agents are assumed to combine limited structural knowledge with a standard adaptive learning rule. These issues are analyzed using two well-known set-ups, an endowment economy and the Ramsey model. In our scenario there are important deviations from both rational expectations and purely adaptive learning. The approach could be applied to other frameworks. |
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Keywords: | Taxation Expectations Ramsey model |
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