Expectations and the Multiplier-Accelerator Model

Lines, Marji; Westerhoff, Frank

doi:10.1007/3-540-32168-3_10

Cited by 8 publications

(8 citation statements)

References 19 publications

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“…In the case of DSGE models, for example, recessions are always the result of some exogenous shock to technology, preferences, price mark-ups etc. Researchers that are deeply rooted in this methodology cannot imagine that recessions could have other reasons as well, although agent-based models such as Westerhoff (2006) or Lengnick (2013) clearly show that it is easy to generate business cycle fluctuations without any exogenous shocks. DSGE researchers treat their shocks as if they were something real rather than a modeling short-cut.…”

Section: Methodological Pluralism In Macroeconomicsmentioning

confidence: 99%

“…Frank Westerhoff has a number of papers that study the complex behavior of quite simple macroeconomic systems in which agents' boundedly rational behavior and their interactions lead to nonlinear dynamics. Lines and Westerhoff (2006) show that the simple Samuelson multiplier-accelerator model with extrapolative and reverting expectations has a Neimark-Sacker bifurcation. Such a bifurcation is also found in a similar model with income-dependent consumer sentiment in Westerhoff (2008).…”

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confidence: 90%

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The Macroeconomics of Radical Uncertainty

Roos

2015

SSRN Journal

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Section: Methodological Pluralism In Macroeconomicsmentioning

confidence: 99%

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confidence: 90%

The Macroeconomics of Radical Uncertainty

Roos

2015

SSRN Journal

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“…The results should prove useful to the increasing number of scholars who are integrating the heterogeneous expectation framework into their own modeling environment 1 . Related studies include Westerhoff (2006a), Lines and Westerhoff (2006a) and Lines (2007a). In these papers, a basic goods market model is used and agents switch between prediction strategies depending on how far the economy has deviated from its long-run equilibrium value.…”

Section: Introductionmentioning

confidence: 99%

Inflation expectations and macroeconomic dynamics: The case of rational versus extrapolative expectations

Lines

Westerhoff

2010

Journal of Economic Dynamics and Control

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The motivation of this paper is to understand the effects of coupling a macroeconomic model of inflation rate dynamics, relying on an aggregate expectation, to a heterogeneous expectations framework. A standard macroeconomic textbook model, consisting of Okun's law, an expectations-augmented Phillips curve and an aggregate demand relation, is extended to allow agents the possibility of selecting between different types of forecasting strategies to predict the future inflation rate. Rules that have produced low prediction errors in the recent past are favored by agents. Here we consider trend-following and rational expectations. Using a mixture of analytical and numerical tools we investigate the model's dynamics and discuss the conditions under which the extended model leads to endogenous fluctuations in macroeconomic variables. Some preliminary results are offered for the case in which a Taylor-like monetary policy rule is included in the model. JEL classification: C61; C62; E31; E32

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“…Westerhoff (2006) modifies the induced investment to depend on a nonlinear mix of extrapolative and regressive expectation formations. Further, Lines and Westerhoff (2006) use a weighted average of extrapolative and reverting expectations formations. Direct consequence of these alternations is that the adjustment process of national income becomes nonlinear and the birth of complex output fluctuations are numerically confirmed.…”

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confidence: 99%