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Nonlinear Expectation Formation, Endogenous Business Cycles and Stylized Facts
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December 4, 2006
We modify Samuelson’s multiplier-accelerator model to explore the influence of expectations on fluctuations in economic activity. Within our model, the agents use a nonlinear mix of extrapolative and regressive forecast rules to predict the output. Our model is able to mimic some generic features of business cycles. In particular, consumption is procyclical and fluctuates less than output while investment is procyclical and fluctuates more than output.
Published Online: 2006-12-4
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Articles in the same Issue
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- Interest Rate Setting and Inflation Targeting: Evidence of a Nonlinear Taylor Rule for the United Kingdom
- Measuring the Interaction of Wage and Price Phillips Curves for the U.S. Economy
- A Switching ARCH Model for the German DAX Index
- Nonlinear Expectation Formation, Endogenous Business Cycles and Stylized Facts
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