Recursive expectations approach in policymaking

Keiichiro Kobayashi

International Journal of Economic Policy Studies, 2023, vol. 17, issue 2, No 3, 385-397

Abstract: Abstract The primary contribution of modern economics to policy analysis may be the recognition of the crucial role of expectations in policy intervention. The essence of expectations is to think about others’ thinking. We argue that policymakers need recursive thinking, that is, the ability to think about thinking and review three policy episodes related to the lack of recursive thinking. We see that the disciplinary divide or the limited scope of recursive thinking on the side of policymakers can cause huge damage to social welfare in times of crisis. Finally, we consider two examples of future agendas in the recursive approach.

Keywords: Recursive expectations; Nonperforming loans; Unconventional monetary policy; COVID-19; PCR testing (search for similar items in EconPapers)
JEL-codes: E50 G01 H30 I00 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s42495-023-00108-w

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