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

Abhishek Das (), Arpita Ghose and Gautam Gupta ()
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Abhishek Das: Jadavpur University
Arpita Ghose: Jadavpur University

Journal of the Knowledge Economy, 2018, vol. 9, issue 1, 17-39

Abstract: 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.

Keywords: Experimental economics; Inflation expectations; Output gap expectation; New Keynesian model; Taylor rule (search for similar items in EconPapers)
JEL-codes: C91 C92 E37 E52 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:spr:jknowl:v:9:y:2018:i:1:d:10.1007_s13132-015-0314-z