On the behavior of fiscal policy with costly expectations

Authors

  • Martín Guzmán

Keywords:

JEL: E32, E62, H30

Abstract

This paper extends the Talvi and Végh (2005) model on the behavior of fiscal policy, introducing agent-based issues. Like in Talvi and Végh (2005), the theoretical framework is à la Barro (1979), but rational expectations are costly. The agents can choose between two strategies in forming expectations: buying costly rational expectations or freely following the trend. Unlike Talvi and Végh (2005), I show that procyclicality of fiscal policy is not necessarily the government s optimal behavior.

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Published

2009-12-30

How to Cite

Guzmán, M. (2009). On the behavior of fiscal policy with costly expectations. Económica, 55, p. 29–44. Retrieved from https://revistas.unlp.edu.ar/Economica/article/view/5374

Issue

Section

Articles