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10 - Generalizing the Pattern-Based Approach

Published online by Cambridge University Press:  24 July 2020

Tobias F. Rötheli
Affiliation:
Universität Erfurt, Germany
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Summary

With this chapter, we take our approach to a wider applicability. So far, the expectations elicited in the laboratory pertained to a set of inflation patterns that was observed in countries like the USA and Germany over the years from the 1950s to the first decade of the 21st century. When we want to model expectations for a wider set of countries and historical periods, we need to generalize our approach. More concretely, it becomes necessary to consider pattern extrapolation for a wider set of possible courses of the price level. Notably, the set of 22 patterns used in the laboratory as described in Chapter 3 barely includes any cases of deflation. For the modeling of historical expectations, this can be quite limiting. Consider only the course of aggregate prices with periods of deflation in countries like the USA and the United Kingdom in the 19th century.

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The Behavioral Economics of Inflation Expectations
Macroeconomics Meets Psychology
, pp. 110 - 132
Publisher: Cambridge University Press
Print publication year: 2020

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