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Policy change and learning in the RBC model

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dc.contributor.authorMitra, Kaushik
dc.contributor.authorEvans, George W
dc.contributor.authorHonkapohja, Seppo
dc.date.accessioned2013-08-21T11:01:02Z
dc.date.available2013-08-21T11:01:02Z
dc.date.issued2013-10
dc.identifier.citationMitra , K , Evans , G W & Honkapohja , S 2013 , ' Policy change and learning in the RBC model ' , Journal of Economic Dynamics and Control , vol. 37 , no. 10 , pp. 1947-1971 . https://doi.org/10.1016/j.jedc.2013.05.011en
dc.identifier.issn0165-1889
dc.identifier.otherPURE: 53829321
dc.identifier.otherPURE UUID: 7179fcce-994b-41c5-9a9f-f10df269acc4
dc.identifier.otherScopus: 84880703407
dc.identifier.urihttp://hdl.handle.net/10023/3973
dc.descriptionThis work was supported by the Economic and Social Research Council (ESRC) [Grant number RES-062-23-2617]en
dc.description.abstractWhat is the impact of surprise and anticipated policy changes when agents form expectations using adaptive learning rather than rational expectations? We examine this issue using the standard stochastic real business cycle model with lump-sum taxes. Agents combine knowledge about future policy with econometric forecasts of future wages and interest rates. Both permanent and temporary policy changes are analyzed. Dynamics under learning can have large impact effects and a gradual hump-shaped response, and tend to be prominently characterized by oscillations not present under rational expectations. These fluctuations reflect periods of excessive optimism or pessimism, followed by subsequent corrections.
dc.format.extent25
dc.language.isoeng
dc.relation.ispartofJournal of Economic Dynamics and Controlen
dc.rightsThis is a paid open access article.en
dc.subjectTaxationen
dc.subjectGovernment spendingen
dc.subjectExpectationsen
dc.subjectPermanent Policy Changesen
dc.subjectHB Economic Theoryen
dc.subject.lccHBen
dc.titlePolicy change and learning in the RBC modelen
dc.typeJournal articleen
dc.contributor.sponsorEconomic & Social Research Councilen
dc.description.versionPublisher PDFen
dc.contributor.institutionUniversity of St Andrews. School of Economics and Financeen
dc.identifier.doihttps://doi.org/10.1016/j.jedc.2013.05.011
dc.description.statusPeer revieweden
dc.identifier.urlhttp://www.sciencedirect.com/science/article/pii/S0165188913001176en
dc.identifier.grantnumberRES-062-23-2617en


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