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Journal of Evolutionary Economics

, Volume 12, Issue 4, pp 375–395 | Cite as

Interactive expectations

  • Burkhard Flieth
  • John Foster
Original paper

Abstract.

In modeling expectation formation, economic agents are usually viewed as forming expectations adaptively or in accordance with some rationality postulate. We offer an alternative nonlinear model where agents exchange their opinions and information with each other. Such a model yields multiple equilibria, or attracting distributions, that are persistent but subject to sudden large jumps. Using German Federal Statistical Office economic indicators and German IFO Poll expectational data, we show that this kind of model performs well in simulation experiments. Focusing upon producers' expectations in the consumption goods sector, we also discover evidence that structural change in the interactive process occurred over the period of investigation (1970–1998). Specifically, interactions in expectation formation seem to have become less important over time.

Key words: Expectations – Business cycle – Business climate – Interaction – Interdependence – Communication – Opinion polls – Non-linear – Germany 
JEL Classification: D83, D84, E32, E37 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2002

Authors and Affiliations

  • Burkhard Flieth
    • 1
  • John Foster
    • 2
  1. 1.ITERGO, Thomas-Dehler-Straße 2, 81737 München, Germany (e-mail: burkhard@flieth.de) DE
  2. 2.The School of Economics, The University of Queensland, Brisbane, Australia (e-mail: j.foster@economics.uq.edu.au) AU

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