The Role of Expectations in Econometric Model Multipliers -An Illustrative Extension of the ESRI Short-Run Macroeconomic Model(in Japanese)

Keiko Murata and Daiju Aoki

Economic Analysis, 2005, vol. 175, 195-214

Abstract: This paper attempts to introduce forward-looking expectations to the ESRI Short-Run Macroeconomic Model. The effects of changes in fiscal and monetary policy are evaluated under two alternative expectation formations: adaptive expectations and forward-looking ones. For the latter, whether the shocks are anticipated or unanticipated is also considered. Although the model is a tentative version, in which agents' expectations are not formed in a strictly "model-consistent" manner, the simulation results show that the adjustment mechanism after a shock is affected by how expectations are treated in the model.

Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:esj:esriea:175h

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