EconPapers    
Economics at your fingertips  
 

Do heterogeneous expectations constitute a challenge for policy interaction?

Emanuel Gasteiger

No 13-02, Working Papers Series 2 from ISCTE-IUL, Business Research Unit (BRU-IUL)

Abstract: Yes, indeed; at least when it comes to fiscal and monetary policy interaction. We examine a Neo-Classical economy, where agents have either rational or adaptive expectations. We demonstrate that the monetarist solution can be unique and stationary under a passive fiscal/active monetary policy regime, because active monetary policy incorporates expectational heterogeneity. In contrast, under an active fiscal/passive monetary policy regime, the fiscalist solution is prone to explosive dynamics d e to empirically plausible expectational heterogeneity. However, conditional on stationarity, both regimes can yield promising business cycle dynamics, which are absent in the homogeneous expectations benchmark.

Keywords: Inflation; Heterogeneous Expectations; Fiscal and Monetary Policy (search for similar items in EconPapers)
JEL-codes: D84 E31 E52 E62 (search for similar items in EconPapers)
Date: 2013-03-18
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://bru-unide.iscte.pt/RePEc/pdfs/13-02.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://bru-unide.iscte.pt/RePEc/pdfs/13-02.pdf [302 Found]--> https://bru.iscte-iul.pt/RePEc/pdfs/13-02.pdf)

Related works:
Journal Article: DO HETEROGENEOUS EXPECTATIONS CONSTITUTE A CHALLENGE FOR POLICY INTERACTION? (2018) Downloads
Working Paper: Do heterogeneous expectations constitute a challenge for policy interaction? (2016) Downloads
Working Paper: Do heterogeneous expectations constitute a challenge for policy interaction? (2015) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:isc:iscwp2:bruwp1302

Access Statistics for this paper

More papers in Working Papers Series 2 from ISCTE-IUL, Business Research Unit (BRU-IUL) Contact information at EDIRC.
Bibliographic data for series maintained by Henrique Monteiro ().

 
Page updated 2025-03-23
Handle: RePEc:isc:iscwp2:bruwp1302