Non-Rational Expectations and the Transmission Mechanism

2012 ◽  
Author(s):  
Richard Harrison ◽  
Tim Taylor
Keyword(s):  
Rational Expectations ◽  
Transmission Mechanism

Monetary Transmission in the Term Structure of Interest Rates in Spain (1995-2003)

2021 ◽  
Vol 26 (1) ◽  
pp. 279-292
Author(s):  
María A. Prats ◽  
Gloria M. Soto
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Rational Expectations ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Var Model ◽  
Expectations Hypothesis ◽  
Weak Evidence ◽  
One Year ◽  
The One

The aim of this paper is to investigate whether the effectiveness of the transmission mechanism of monetary  policy in Spain has changed since EMU establishment. The analysis is based on the fulfillment of the Expectations Hypothesis under rational expectations and the methodology is implemented through a  cointegrated  bivariate VAR model. The results reveal the existence of  monetary transmission in the term structure in the  period prior to EMU, even though the evidence is stronger up to the one-year rate. From 1999, the results are   only consistent with a weak evidence of monetary transmission.

scholarly journals Complex Network Analysis of Transmission Mechanism for Sustainable Incentive Policies

2020 ◽  
Vol 12 (2) ◽  
pp. 745 ◽  
Author(s):  
Lingyan Li ◽  
Lujiao Feng ◽  
Xiaotong Guo ◽  
Haiyan Xie ◽  
Wei Shi
Keyword(s):  
Complex Network ◽  
Rational Expectations ◽  
Clustering Coefficient ◽  
Transmission Mechanism ◽  
Sustainable Construction ◽  
Eastern Coast ◽  
Relationship Matrix ◽  
Transmission Path ◽  
External Impact ◽  
Incentive Policies

Existing research mainly focuses on the external impact of incentive policies of industrialized/manufactured construction (IMC). However, it is still unclear how the transmission mechanism among cities and regions of IMC incentive policies works in the process of formulation. To fill the knowledge gap, this study establishes a relationship matrix to propose the transmission-weighted complex network (TWCN). Degree distribution and clustering coefficient are used to calculate the transmission path and the transmission intensity of TWCN. The validation is based on data collected from 415 policy documents (2010–2018) and 2923 items from 181 nodes of the TWCN for IMC policies. The findings show that transmission path of IMC incentive policies is from the eastern coast of China to the central, western and northern regions. Fiscal and taxation incentives have the greatest intensity of spatial agglomeration in the transmission process. The results of the TWCN are consistent and conform to the scientific and rational expectations of research. Overall, the research outcomes are applicable to studies on sustainability policies in different fields, including sustainable construction, renewable energy, etc. Policy makers can implement the TWCN to recognize the performance and functions of different incentives and propose effective strategies to achieve sustainability.

scholarly journals The Monetary Transmission Mechanism: An Empirical Framework

1995 ◽  
Vol 9 (4) ◽  
pp. 11-26 ◽  
Author(s):  
John B Taylor
Keyword(s):  
Interest Rates ◽  
Rational Expectations ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Market Prices ◽  
Policy Rules ◽  
Monetary Transmission Mechanism ◽  
Real Gdp ◽  
The Impact

This paper provides an overview of the monetary transmission mechanism describing the impact of changes in monetary policy on real GDP. Changes in financial market prices--including long-term interest rates and exchange rates--are the main vehicle for the transmission of policy. The framework incorporates rational expectations and policy rules. It is empirical and appears to fit the facts well.

WHAT WE DON'T KNOW ABOUT THE MONETARY TRANSMISSION MECHANISM AND WHY WE DON'T KNOW IT

2008 ◽  
Vol 12 (S1) ◽  
pp. 60-74 ◽  
Author(s):  
ANDREAS BEYER ◽  
ROGER E.A. FARMER
Keyword(s):  
Rational Expectations ◽  
Transmission Mechanism ◽  
New Keynesian ◽  
Monetary Transmission ◽  
Reduced Form ◽  
New Keynesian Model ◽  
Policy Rule ◽  
Policy Regime ◽  
Equivalent Models ◽  
Keynesian Model

We study identification in a class of linear rational expectations models. For any given exactly identified model, we provide an algorithm that generates a class of equivalent models that have the same reduced form. We use our algorithm to show that a model proposed by Jess Benhabib and Roger Farmer is observationally equivalent to the standard new-Keynesian model when observed over a single policy regime. However, the two models havedifferentimplications for the design of an optimal policy rule.

2008 Economy Results: The End of the "Fat" Years

2009 ◽  
pp. 4-25 ◽  
Author(s):  
B. Zamaraev ◽  
A. Kiyutsevskaya ◽  
A. Nazarova ◽  
E. Sukhanov
Keyword(s):  
Economic Crisis ◽  
National Economy ◽  
Banking System ◽  
Housing Markets ◽  
Transmission Mechanism ◽  
Economic Conditions ◽  
Basic Change ◽  
Russian Economy ◽  
The World

The article analyzes the current economic conditions in Russia. Succession, distribution and the transmission mechanism of the world financial and economic crisis to the Russian economy are considered in this article as well as the changes in the banking system, share and housing markets. Production, consumption and investment on the boundary of 2008-2009 are described. The conclusion about the basic change of conditions of national economy development is presented.

Rational Expectations and Inflation

2017 ◽  
Author(s):  
Thomas J. Sargent
Keyword(s):  
World War I ◽  
French Revolution ◽  
Rational Expectations ◽  
Ronald Reagan ◽  
Fiscal Policies ◽  
Economic Policies ◽  
Budget Deficits ◽  
Nobel Lecture ◽  
Economic Decisions ◽  
The French Revolution

This collection of essays uses the lens of rational expectations theory to examine how governments anticipate and plan for inflation, and provides insight into the pioneering research for which the author was awarded the 2011 Nobel Prize in economics. Rational expectations theory is based on the simple premise that people will use all the information available to them in making economic decisions, yet applying the theory to macroeconomics and econometrics is technically demanding. This book engages with practical problems in economics in a less formal, noneconometric way, demonstrating how rational expectations can satisfactorily interpret a range of historical and contemporary events. It focuses on periods of actual or threatened depreciation in the value of a nation's currency. Drawing on historical attempts to counter inflation, from the French Revolution and the aftermath of World War I to the economic policies of Margaret Thatcher and Ronald Reagan, the book finds that there is no purely monetary cure for inflation; rather, monetary and fiscal policies must be coordinated. This fully expanded edition includes the author's 2011 Nobel lecture, “United States Then, Europe Now.” It also features new articles on the macroeconomics of the French Revolution and government budget deficits.

The Micro and Macro of Managerial Beliefs

2020 ◽  
Author(s):  
Jose Maria Barrero
Keyword(s):  
Rational Expectations ◽  
Asset Price ◽  
Heterogeneous Firms ◽  
Adjustment Costs ◽  
Consumer Welfare ◽  
Sales Growth ◽  
Firm Level ◽  
Managerial Decisions ◽  
Managerial Beliefs ◽  
Growth Volatility

This paper studies how biases in managerial beliefs affect managerial decisions, firm performance, and the macroeconomy. Using a new survey of US managers I establish three facts. (1) Managers are not over-optimistic: sales growth forecasts on average do not exceed realizations. (2) Managers are overprecise (overconfident): they underestimate future sales growth volatility. (3) Managers overextrapolate: their forecasts are too optimistic after positive shocks and too pessimistic after negative shocks. To quantify the implications of these facts, I estimate a dynamic general equilibrium model in which managers of heterogeneous firms use a subjective beliefs process to make forward-looking hiring decisions. Overprecision and overextrapolation lead managers to overreact to firm-level shocks and overspend on adjustment costs, destroying 2.1 percent of the typical firm’s value. Pervasive overreaction leads to excess volatility and reallocation, lowering consumer welfare by 0.5 to 2.3 percent relative to the rational expectations equilibrium. These findings suggest overreaction may amplify asset-price and business cycle fluctuations.

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