Managing Self-organization of Expectations through Monetary Policy: a Macro Experiment

Tiziana Assenza, P. Heemeijer, Cars Hommes and Domenico Massaro
Additional contact information
P. Heemeijer: De Nederlandsche Bank

No 14-07, CeNDEF Working Papers from Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance

Abstract: We use laboratory experiments to study individual expectations and aggregate macro behavior in a New Keynesian framework. Four different aggregate outcomes arise: convergence to equilibrium, explosive behavior along inflationary or deflationary spirals, persistent or dampened oscillations. A heuristics switching model, driven by relative performance, explains these patterns as emerging properties of the path-dependent self-organization process of heterogeneous expectations leading to coordination on an almost self-fulfilling rule. A more aggressive Taylor rule can manage the self-organization process adding negative feedback to the overall positive feedback system, making coordination on destabilizing trend-following expectations less likely and coordination on stabilizing adaptive expectations more likely.

Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (26)

Downloads: (external link)
http://cendef.uva.nl/binaries/content/assets/subsi ... nt.pdf?1415783795726 (application/pdf)

Related works:
Journal Article: Managing self-organization of expectations through monetary policy: A macro experiment (2021)
Working Paper: Managing Self-organization of Expectations through Monetary Policy: a Macro Experiment (2021)
Working Paper: Managing Self-organization of Expectations through Monetary Policy: a Macro Experiment (2018)
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:ams:ndfwpp:14-07

Access Statistics for this paper

More papers in CeNDEF Working Papers from Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance Dept. of Economics and Econometrics, Universiteit van Amsterdam, Roetersstraat 11, NL - 1018 WB Amsterdam, The Netherlands. Contact information at EDIRC.
Bibliographic data for series maintained by Cees C.G. Diks ().