Arnon / Young / Beek Expectations

Theory and Applications from Historical Perspectives
1. Auflage 2020
ISBN: 978-3-030-41357-6
Verlag: Springer International Publishing
Format: PDF
Kopierschutz: 1 - PDF Watermark

E-Book, Englisch, 238 Seiten

Reihe: Springer Studies in the History of Economic Thought

This book provides a unique historical perspective on expectations in economic theory, and applications of expectations models in economic history. Based on papers presented at the 2017 Thomas Guggenheim Conference, it brings together the work of economists, historians of economics, and economic historians on issues and events concerning expectations in economics and economic history. The contributions address: (i) the history of expectations models; (ii) growth, expectations and political economy; (iii) controversies regarding expectations methods and models; (iv) expectations in theory and reality; and (v) expectations in economic history.

The book opens with a lecture by Thomas Guggenheim Prize winner Duncan Foley on the evolution of expectations in modern economic thought. The remaining content is divided into two parts, the first of which focuses on the utilization of expectations in the “ancient” and “meso” periods of high theory, i.e., from Smithian to Keynesian approaches. The papers cover topics such as “modern” applications of expectations in both “Tobinesque-Phillips” and “Harrodian-Solowian” contexts, and the debate between Friedmanite and Keynesian approaches to expectation formation. In turn, the last part presents essays on the role of economic expectations in connection with historical events and contexts, ranging from the early 20th century to World War II, and on the application of expectations theory to hyperinflation and stabilization, taking Israel as a case study.

Autoren/Hrsg.

Arnon, Arie

Young, Warren

Beek, Karine van der

Inhaltsverzeichnis

1;Foreword;6
2;Introduction;8
3;Contents;12
4;List of Participants;14
5;Part I Guggenheim Prize Lecture;15
6; Unfulfilled Expectations: One Economist's History;16
6.1;1 What Did You and I Expect?;16
6.2;2 M.I.T. and Miguel Sidrauski;17
6.3;3 Rational Expectations;20
6.4;4 Dynamics and Complexity;21
6.5;5 Two Sorts of Expectations;25
6.6;6 Boundedly Rational Expectations;26
6.7;7 Hindsight: Intellectual Odyssey or Wild Goose Chase?;28
6.8;References;30
7;Part II Expectations and Economic Thought: Classics and Moderns;31
8; Expectations and Its Variants: The Nuanced Role of Expectations in Classical Economics;32
8.1;1 Introduction;32
8.2;2 Expectational Fallacies;38
8.2.1;2.1 Expectations Regarding the Beneficial Nature of Competitive Institutions;38
8.2.2;2.2 Moral Expectations;42
8.2.3;2.3 A Note on the Dynamic Aspect of Expectations;47
8.3;3 Expectations and Anticipations in Smith’s Narrative;51
8.4;4 Conclusions;60
8.5;References;61
9; Expectations, Conjectures and Beliefs. The Legacy of Marshall, Kahn and Keynes;63
9.1;1 Introduction;63
9.2;2 Marshall;65
9.3;3 Kahn;66
9.4;4 Keynes;69
9.5;5 The Role of Expectations in Generating Market Instability;70
9.6;6 Observation-Based Expectations;72
9.7;7 Expectations as Dividing Issue;73
9.8;8 Some Concluding Remarks;75
9.9;References;75
10; Between Pigou and Keynes: Champernowne on Employment and Expectations;78
10.1;1 Sorting Out Cambridge Expectations;78
10.2;2 Labour Supply and Money-Wage Dynamics;81
10.3;3 Monetary Policy and the Trend of Real Wages;84
10.4;4 Keynes Versus Pigou on the Role of Expectations;88
10.5;5 The Champernowne Puzzle;91
10.6;References;92
11; Keynes and Friedman on Expectations Mismatches During the Great Depression;95
11.1;1 Introduction;95
11.2;2 Friedman and the Case for Purely Monetary Disorders;96
11.2.1;2.1 Friedman’s Narrative of the Great Depression;96
11.2.2;2.2 Expectations and Friedman’s Rationale for the Great Depression;99
11.3;3 Keynes and the Case for Self-feeding Real Disorders;103
11.3.1;3.1 1929–30 and Keynes’ Initial Diagnosis for an “Abnormal” Slump;103
11.3.2;3.2 1931–32 and the Developing of the Slump;106
11.3.3;3.3 From 1932 to 1933 Onwards: The Great Depression and Mismatches in Long-Term Expectations;110
11.4;4 Conclusion;113
11.5;References;114
12; Expectations in Tobin’s Macroeconomics: The Fisherian and Keynesian Roots of Tobin’s q and Corridor of Stability;117
12.1;1 Introduction;117
12.2;2 Keynes’s Q, Tobin’s q, Fisher’s Net Present Value;118
12.3;3 Liquidity Preference as Behavior Toward Risk;120
12.4;4 Expectations and Macroeconomic Instability: An “Old Keynesian” View;123
12.5;5 Conclusion;126
12.6;References;126
13; Growth Without Expectations: The Original Sin of Neoclassical Growth Models;129
13.1;1 Introduction;129
13.2;2 Stumbling Toward Instability: Harrod’s Attempt to Incorporate Expectations;131
13.3;3 Getting Rid of Expectations: The Original Sin of Neoclassical Growth Models;133
13.4;4 Conclusions;136
13.5;References;137
14; Inflation Expectations and the Phillips Curve: Then and Now;139
14.1;1 Inflation Expectations: Recent Importance and Interest;139
14.2;2 Different Types of Inflation Expectations;141
14.2.1;2.1 Static Expectations;141
14.2.2;2.2 Extrapolative Expectations;142
14.2.3;2.3 Adaptive Expectations;142
14.2.4;2.4 Rational Expectations;145
14.3;3 Historical Origins;145
14.4;4 Ways Ahead: Whose Expectations?;148
14.5;References;150
15;Part III Expectations and Applications: Economic Models and Case Studies;153
16; The War that Bond Markets Did not Perceive as Such;154
16.1;1 Introduction;154
16.2;2 The South African Republic on the Road to Annexation;156
16.3;3 Data;159
16.4;4 State Succession and Rothschild Guarantee;163
16.5;5 Conclusion;169
16.6;Appendix—The 1892 SAR Bond Certificate;171
16.7;References;172
17; Expectations and Planning at the FED: 1939–1941;175
17.1;1 Introduction;175
17.2;2 Expectations and Planning for War: September 1939–April 1940;178
17.3;3 Expectations and Planning for War: April–September 1940;182
17.4;4 Expectations and Planning for War: September 1940–December 1941;186
17.5;5 Summary and Conclusion;189
17.6;References;189
18; Israel’s Struggle Toward Macroeconomic Stability: Role of Inflationary Expectations;191
18.1;1 Introduction;191
18.2;2 Inflation Crisis;193
18.3;3 Political–Economy Policy Shift;195
18.4;4 Populism and Seigniorage Finance;196
18.5;5 The Distributive Effects of Inflation Stabilization;199
18.6;6 A Balance-of-Payment Crisis;200
18.7;7 Disinflation and Globalization;203
18.8;8 The Flattening of the Phillips Curve;205
18.9;9 Convergence of Inflation Rates;208
18.10;10 Depression–Deflation Resistance;210
18.11;11 Conclusion;215
18.12;Appendix: Globalization and the Phillips Curve;217
18.13;References;218
19; The Permanent-Transitory Confusion: Implications for Tests of Market Efficiency and for Expected Inflation During Turbulent and Tranquil Times;221
19.1;1 Introduction;222
19.2;2 Adaptive Expectations Through the Ages and Muth Model of the Permanent-Transitory Confusion;223
19.2.1;2.1 Adaptive Expectations;223
19.2.2;2.2 The Permanent-Transitory Confusion and Muth (1960) Statistical Foundations for It;224
19.2.3;2.3 Past Applications of Muth’s Predictor;226
19.3;3 Tests of Market Efficiency in the Treasury Bills and Foreign Exchange Markets;226
19.3.1;3.1 Fama (1975) Early Efficiency Test of Current Interest Rates as Predictors of Future Inflation;227
19.3.2;3.2 Efficiency Tests of Forward Premia as Predictors of Future Spot Exchange Rates;228
19.3.3;3.3 A More General Reformulation of Market Efficiency Tests;229
19.4;4 The Impact of Occasionally Large Permanent Shocks on the Serial Correlation in Forecast Errors: The Case of Finite Samples;230
19.5;5 Turbulent Times: The Behavior of Expected Inflation During Disinflation;233
19.5.1;5.1 An Empirical Application to the Israeli 1985 Cold Turkey Stabilization;233
19.5.2;5.2 Estimation of the Learning Parameter During the 1985 Stabilization;235
19.6;6 The Performance of Adaptive Expectations During Tranquil Times: Israel 2003–2018;236
19.6.1;6.1 Estimation of the Learning Parameter During the Tranquil 2003–2018 Period;236
19.7;7 Concluding Remarks;239
19.8;Appendix;240
19.8.1;Derivation of Equation (15);240
19.8.2;Proof that Eut+1ut = 0;240
19.8.3;Derivation of ?j(?Ytp) (Eq. 20);241
19.8.4;Derivation of Equation (23);242
19.8.5;Proof that Using Observations on yt and yte or on ?t and ?te Yield Identical Estimates of ? and of ?ytp 2;242
19.9;References;243