Inflation Expectation Decision and Saving Decision in Heterogeneously Endowed Overlapping Generation Model: An Experimental Evidence from Laboratory

Das, Abhishek and Gupta, Gautam (2015): Inflation Expectation Decision and Saving Decision in Heterogeneously Endowed Overlapping Generation Model: An Experimental Evidence from Laboratory.

Abstract

In this paper we use a heterogeneously endowed Overlapping Generation model (OLG) in an experimental framework. . In our experimental OLG economy young subjects are asked either to predict the inflation rate for the next period or to decide his/her savings for the current period. We find that for both the decisions neither higher amount of government expenditure nor the higher amount of money supply by monetary authority will move inflation rate towards equilibrium. We also find that that if there is much uncertainty, Friedman Conjecture will not work.

• Item Type: MPRA Paper
• Language: English
• Keywords: OLG-model; Expectations; Inflation; Stability; Monetary policy; Experiments
• Subjects: C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C92 - Laboratory, Group Behavior; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy

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