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Studies in Nonlinear Dynamics & Econometrics

Ed. by Mizrach, Bruce

5 Issues per year


IMPACT FACTOR 2017: 0.855

CiteScore 2017: 0.76

SCImago Journal Rank (SJR) 2017: 0.668
Source Normalized Impact per Paper (SNIP) 2017: 0.894

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1558-3708
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Volume 16, Issue 4

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An Experimental Study on Expectations and Learning in Overlapping Generations Models

Peter Heemeijer / Cars Hommes / Joep Sonnemans / Jan Tuinstra
Published Online: 2012-10-16 | DOI: https://doi.org/10.1515/1558-3708.1944

Abstract

A plethora of models of learning has been developed and studied in macro-economic models in recent years. In this paper we will try to discriminate between these learning models by running laboratory experiments with incentivized human subjects. Participants predict inflation rates for 50 successive periods in a standard overlapping generations model and are rewarded on the basis of their forecasting accuracy. The information set for each participant contains the past inflation rates and the participant's own past predictions which, in turn, determine the actual inflation rate. We consider two treatments, with a low and a high level of monetary growth, respectively. We find that the level of convergence to the monetary steady state is significantly lower and volatility of inflation rates higher in the second treatment. Constant gain learning algorithms, such as adaptive expectations with a low adjustment parameter, seem to provide a better description of the experimental data than decreasing gain algorithms, such as (ordinary) least squares learning. Moreover, many participants switch between prediction strategies during the experiment on the basis of poor performance of their initial prediction strategy.

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Published Online: 2012-10-16


Citation Information: Studies in Nonlinear Dynamics & Econometrics, Volume 16, Issue 4, ISSN (Online) 1558-3708, DOI: https://doi.org/10.1515/1558-3708.1944.

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©2012 Walter de Gruyter GmbH & Co. KG, Berlin/Boston.Get Permission

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[1]
Chetan Dave and Samreen Malik
European Economic Review, 2017
[2]
Domenico Colucci and Vincenzo Valori
Mathematics and Computers in Simulation, 2015, Volume 108, Page 233

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