Expectation Formation Research Articles

CANVAS: A Canadian behavioral agent-based model for monetary policy

We develop the Canadian behavioral Agent-Based Model (CANVAS) that complements traditional macroeconomic models for forecasting and monetary policy analysis. CANVAS represents a next-generation modeling effort featuring enhancements in three dimensions: introducing household and firm heterogeneity, departing from rational expectations, and modeling price and quantity setting heuristics within a production network. The expanded modeling capacity is achieved by harnessing large-scale Canadian micro- and macroeconomic datasets and incorporating adaptive learning and simple heuristics. The out-of-sample forecasting performance of CANVAS is found to be competitive with a benchmark vector auto-regressive (VAR) model and a DSGE model. When applied to analyze the COVID-19 pandemic episode, our model helps explain both the macroeconomic movement and the interplay between expectation formation and cost-push shocks. CANVAS is one of the first macroeconomic agent-based models applied by a central bank to support projection and alternative scenarios, marking an advancement in the toolkit of central banks and enriching monetary policy analysis.

Efficiency Gains through Social Influence in a Minimum Effort Game

We explore the role of social influence in coordinating effort choice in a game with strategic complementarities. Agents are repeatedly randomly partitioned into groups to play a minimum effort game and choose their effort based on their beliefs about the minimal effort among the other group members. Individual expectations about this minimal effort are influenced by their own experience and by communication of beliefs within a social network. We show that increasing the importance of social influence in the expectation formation process has positive effects on the emerging (long-run) effort level, thereby improving the efficiency of the outcome. Furthermore, a more centralized social network leads to higher average efficiency, but also to increased variance of outcomes. Communication of actual minimum effort cannot replace the communication of beliefs as a device fostering the emergence of high long-run effort.

Factors in the Formation of Inflation Expectations as Recorded in the Russian National Survey of Consumer Finance

Factors in the Formation of Inflation Expectations as Recorded in the Russian National Survey of Consumer Finance

THE FORMATION OF POSITIVE EXPECTATIONS AS A MOTIVATIONAL RESOURCE FOR PERSONNEL TRAINING

The purpose of the article: based on the analysis of the most popular theories of motivation to study, to show the role of the formation of positive expectations in adult study participants on motivation to study and its results. Motivation to study is understood as a hypothetical construction that consists of a general set of processes, methods, and means of motivating individuals to productive cognitive activity, and active assimilation of knowledge, which depends on the level of formation of their motivation to study, as well as the desire and desire to learn. One of the factors of motivation is expectations, which are interpreted as the result or its probability, what a person would like to get from his efforts and, accordingly, exactly what efforts he is ready to spend for this. The article examines the theories of activity motivation and learning motivation with a focus on the formation of positive learning expectations as a factor in motivating the learning activities of employees of enterprises. It analyzes how expectations affect the motivation of learning in adults, how they can be used in the formation of learning strategies, and which needs are the most critical for the formation of internal learning motivation. It was determined that according to the latest research, the most relevant expectations in the formation of educational motivation are the interaction of the need for autonomy, competence, social context, the practicality of acquired knowledge, the formation of a positive educational experience, and incorrectly formed expectations can be a powerful demotivating factor. Keywords: learning motivation, internal and external learning motives, learning motivation in crisis conditions

Central bank communication in unconventional times: Some evidence from a textual analysis of the National Bank of Poland communication during the COVID-crisis

The article analyses the communication of the National Bank of Poland (NBP) one year after the announcement of the crisis response package adopted after the outbreak of the COVID pandemic. It presents the perspective of a central bank that first entered unconventional monetary ground during the COVID-crisis. The analysis aims to answer the question of what message about monetary policy objectives may have been conveyed in communication with regard to possible interpretations of the response actions by economic agents. Misinterpretations of policy actions at the time, fuelled by the increased attention to inflation, could later contribute to higher inflation persistence. The article presents findings based on the innovative use of MAXQDA Pro 2022 solutions for textual analysis of central bank’s communication. It points to three inconsistencies in the NBP’s communication that could potentially lead to misinterpretation of the NBP’s policy actions in response to the crisis and thus affect the formation of expectations.

Dopamine has no direct causal role in the formation of treatment expectations and placebo analgesia in humans.

Dopamine-based reward and learning mechanisms have been suggested to contribute to placebo effects. However, the exact role of dopaminergic neurotransmission in their generation and maintenance is still unclear. This study aimed to shed light on the causal role of dopamine in establishing positive treatment expectations, as well as on the magnitude and duration of their effect on pain. To this end, we used an established placebo analgesia paradigm in combination with 2 opposing pharmacological modulations of dopaminergic tone, i.e., the dopamine antagonist sulpiride and the dopamine precursor L-dopa which were both applied in an experimental, double-blind, randomized, placebo-controlled trial with a between-subject design in N = 168 healthy volunteers. The study medication successfully altered dopaminergic tone during the conditioning procedure. Contrary to our hypotheses, the medication did not modulate the formation of positive treatment expectation and placebo analgesia tested 1 day later. Placebo analgesia was no longer detectable on day 8 after conditioning. Using a combined frequentist and Bayesian approach, our data provide strong evidence against a direct dopaminergic influence on the generation and maintenance of placebo effects. Further exploration of the neurochemical mechanisms underlying placebo analgesia remains paramount in the quest to exploit these effects for optimal treatment outcomes. Trial registration: ClinicalTrials.gov German Clinical Trials Register, ID: DRKS00029366, https://drks.de/search/en/trial/DRKS00029366.

The effects of self-oriented perfectionism in an experimental personnel selection context: a self-validation analysis / Los efectos del perfeccionismo auto-orientado en un contexto experimental de selección de personal: un análisis desde la auto-validación

This study analysed the effects of perfectionism on the formation of attitudes and expectations of organisational behaviour in potential recruiters. Specifically, the dimensions of perfectionism proposed by Hewitt and Flett were analysed in relation to the meta-cognitive process of thought self-validation. Participants were randomly exposed to the résumé (strong vs. weak) of a job candidate that produced either favourable thoughts (strong résumé) or unfavourable thoughts (weak résumé) about the candidate and the résumé. As hypothesised, participants perceived their thoughts as more perfect the higher their self-oriented perfectionism. Consequently, this led them to be more certain and confident in the thoughts generated. This greater cognitive validation of their own thoughts, in turn, gave rise to more polarised attitudes (either in favour of or against the candidate) and expectations about performance, adaptation and organisational commitment, according to the thoughts generated (favourable vs. unfavourable). The implications for research in persuasion and its application in personnel selection are discussed in this article.

From expectation to action: an empirical study of the role of confidence

We explore formation of expectations and links between expectations and action among Croatian micro-producers of organic fruits and vegetables. Twenty-nine interviews with entrepreneurs from all Croatian counties and the City of Zagreb were conducted. Thematic analysis reveals four recurring themes linking participants’ expectations and action: positive feedback, coordination devices, proximal vs. distal bias and retrospecting prospects. We relate these themes to the valence of expectations (positive, negative or neutral) and situate our findings within broader theoretical frameworks of Barbalet’s theory of confidence and Emirbayer and Mische’s theory of agency. Enjoying acceptance and recognition as members of community-supported agriculture groups, and having access to specific resources as members of associations of organic producers are identified as key drivers of optimism and confidence among the participants.

Neurocognitive Latent Factors Associate With Early Tobacco and Alcohol Use Among Adolescent Brain Cognitive Development Study Youth

PurposeProspective associations between preadolescent neurocognitive structure and onset of substance use in adolescence have not been examined. This study investigated associations between cognitive structure among youth aged 9 – 10 years and the likelihood of experimentation with tobacco and alcohol by ages 13–14 years. MethodsA principal component (PC) analysis of nine neurocognitive assessments was used to identify the cognitive structure of unrelated adolescent brain cognitive development study participants (n = 9,655). We modeled associations between neurocognitive PCs and odds of tobacco or alcohol use by ages 13–14 years using generalized linear mixed models with a logit link and random intercept for recruitment sites. Demographics, family conflict, neighborhood safety, and externalizing and internalizing behavior were considered covariates. ResultsFour neurocognitive PCs were identified and labeled general ability, executive function, learning and memory, and mental rotation. Mental rotation [odds ratio [OR] = 0.88, p-value = .013] was associated with lower odds of youth tobacco use; the association was stronger among female youth. General ability [OR = 1.20, p-value < .0001] among both males and females, and learning and memory [OR = 1.11, p-value = .024] among females, were associated with increased odds of youth alcohol use. DiscussionAmong youth, higher neurocognitive performance was protective for tobacco use but increased the likelihood of alcohol use. Potential sex differences were identified. The role of cognition in processing the social contexts surrounding tobacco and alcohol use in the United States may contribute to the formation of disparate youth expectancies for tobacco and alcohol use.

Contingency enables the formation of social expectations about an artificial agent.

What environmental regularities support infant communicative learning from social interactions? We propose that infants allocate their attention toward and learn from external events that are contingent on their own behaviors. We tested the robustness of the influence of contingency on communicative learning by using a non-biological stimulus, a remote-controlled car, as the social partner. The car approached infants and produced a speech sound either contingently to infants' vocalizations or on a yoked schedule. Two additional groups had an unfamiliar human experimenter as their social partner in contingent and yoked control conditions. We assessed whether infants formed expectations about their partner's responsiveness to their vocalizations. Expectations made based on contingent responsiveness would support the role of contingency in promoting plasticity in early communicative learning. Infants across all conditions increased their vocalization rates when their partner paused in responding, suggesting that they expected their vocalizations to influence their partners' behavior. Infants vocalized significantly more to the social partner than their caregiver if they received contingent rather than yoked responses from the social partner, regardless of if the partner was a human or non-biological agent. Contingent responses to prelinguistic vocalizations facilitated the formation of expectations for interactivity of social partners.

Strategic complementarities, coordination failures, and macroeconomic fluctuations: from multiplicity of equilibria to disequilibrium dynamics

This paper retraces the main research avenues explored by some Keynesian macroeconomists from the mid-1980s to model aggregate fluctuations with strategic complementarities. Starting from the static coordination failure framework we identify the different devices implemented to deal with dynamics in deterministic or stochastic settings. The text examines how the analysis shifted from a multiplicity of equilibria to a multiplicity of steady states or equilibrium paths. From this standpoint, we confront the properties obtained under perfect foresight and alternative expectation formation schemes focussing on disequilibrium adjustments. The article also includes a tentative exploration of the reasons for the decline of this view.

The propagation of business expectations within the European Union

SummaryThis paper empirically investigates the propagation of firm expectations within the European Union (EU). To this end, we combine information from EU‐wide official business surveys with input–output data. Econometrically, we model interdependencies in economic activities via input–output linkages and apply space‐time models with common factors. The resulting evidence provides indication for the existence of substantial spillover effects in expectation formation. They are transmitted both upstream and downstream the European value chain, but the latter channel matters more.

Inflation-overshooting commitment: an analysis using a macroeconomic model

Abstract This article examines the effectiveness of the makeup strategy for Japan’s economy, where inflation expectations formation is known to be largely adaptive. We build a small-scale macroeconomic model and conduct simulation analysis to study the implications of adopting the makeup strategy for early achievement of the inflation target and the incurring costs. Simulation results show that when the inflation rate has been below the target, it is effective to stabilize average inflation by offsetting the past inflation misses over some makeup windows and that when the natural rate of interest is lower, the optimal makeup window becomes longer.

Firms’ economic growth expectations and reactions to micro and macro news in Japan

ABSTRACT This study investigates whether firms’ expectations of aggregate output growth overreact or underreact to micro and macro news by examining firm surveys conducted by a Japanese newspaper company, Nikkei. We capture micro news measured by forecast revisions and macro news measured by a new variable, the Japanese government’s growth forecast and that of professional forecasters’ consensus. We found that firms’ economic growth expectations overreact only to macro news. Our results indicate the heterogeneity of firm expectations formation across target variables and news types. Our findings suggest that firms excessively rely on government forecasts in turbulent times. The overreaction of firms’ output growth expectations to the government’s forecast may be associated with their lower performance, and that the government’s macroeconomic forecasts play a role in macroeconomic performance through firms’ expectation channels.

Heterogeneous overreaction in expectation formation: Evidence and theory

Using firm-level earnings forecasts and managerial guidance data, we construct guidance surprises for analysts, i.e., differences between managerial guidance and analysts' initial forecasts. We document new evidence on expectation formation: (i) analysts overreact to managerial guidance and the overreaction is state-dependent, i.e., it is stronger for negative guidance surprises but weaker for surprises that are larger in size; and (ii) forecast revisions are neither symmetric in guidance surprises nor monotonic. We organize these facts with a model where analysts are uncertain about the quality of managerial guidance. We show that a reasonable degree of ambiguity aversion is necessary to account for the documented heterogeneous overreaction pattern.

Expectation formation and the Phillips curve revisited

Abstract This paper studies expectation formation of professional forecasters in the context of the Phillips curve. We assess whether professionals form their expectations regarding inflation and unemployment consistent with the Phillips curve based on individual forecast data taken from the ECB Survey of Professional Forecasters. We consider expectations over different horizons and do not restrict the analysis to point forecasts but we also take the information inherent in density forecasts into account. We explicitly consider the role of anchoring of inflation expectations as potential source of nonlinearity, and we also assess whether the Phillips curve relation translates to a link between uncertainty regarding inflation and unemployment. Our findings show that professionals tend to build their expectations in line with the Phillips curve but this is only observed for expectations made for shorter horizons. For longer horizons, the Phillips curve connection is much weaker. This relationship also depends on the degree of anchoring and results in a connection between uncertainty regarding future inflation and unemployment.

Firms’ Inflation Expectations: New Evidence from France

Abstract Using a new survey of firms’ inflation expectations in France, we provide novel evidence about the measurement and formation of inflation expectations on the part of firms. First, French firms report inflation expectations with a smaller, but still positive, bias than households and display less disagreement. Second, we characterize the extent and manner in which the wording of questions matters for the measurement of firms’ inflation expectations. Third, we document whether and how the position of the respondent within the firm affects the provided responses. Fourth, because our survey measures firms’ expectations about aggregate and firm-level wage growth along with their inflation expectations, we can show that expectations about wages are even more condensed than firms’ inflation expectations and almost completely uncorrelated with them, indicating that firms perceive little link between price and wage inflation. Finally, an experimental treatment indicates that an exogenous change in firms’ inflation expectations has no effect on their aggregate wage expectations.

Individual social capital and expectations of career advancement

AbstractThis article studies the association between the characteristics of individuals’ social networks and expectations of career advancement, including pay raises and job promotions. The literature has extensively documented the role of social capital as a determinant of labour market outcomes. However, the formation of expectations constitutes another critical path by which social ties may affect work through their influence on individual motivation and behaviour. This study attempts to explain the relationship between social capital and career-related expectations and empirically assesses these associations by employing data from a survey administered to a representative sample of the Spanish population. Our findings suggest that the ability to mobilise network resources is positively linked with both measures of career advancement. However, access to the upper class is only positively associated with expecting a pay rise. Additionally, for non-employed individuals, higher mobilisation is positively associated with the expectation of an increase in income.

Inflation expectations and consumer sentiments of the Urals population

In recent decades, central banks of an increasing number of countries have been using the inflation targeting regime in their monetary policy, since it has proven to be an effective tool for balancing economic growth and inflation. In countries with the regional heterogeneity, local manifestations of inflation may differ significantly, which entails a shift in inflation expectations and their unequal impact on actual dynamics of prices in the future. The article explores the determinants of inflation expectations in Ural regions of Russia. The methodological basis of the study includes monetary concepts developed primarily within the framework of the new Keynesian theory and linking monetary policy with the assessments of inflation expectations. The study uses methods of statistical processing of the data collected during two rounds of monitoring of the population’s inflation expectations. The evidence of the study comes from the surveys conducted on a sample of 2,976 respondents. The study reveals regional, social and allocative heterogeneity in the perception of dynamics of prices and the formation of inflationary expectations. The results of the study contribute to understanding the nature of inflation expectations using the case of the Urals population and can become a basis for developing targeted communication measures aimed at bringing inflation closer to the target.

Analysis of The Expectations of Gresik Residents in Searching for Tourist Information Through Hashtags and Geotags on Instagram

This research aims to analyze the process of forming tourists' expectations through the use of information search features such as hashtags and geotags on the social media platform Instagram. Social media has transformed how information is disseminated and consumed through usergenerated content. On Instagram, users are not only passive consumers but also active providers and consumers of information. They can freely share their travel experiences through posts that are tagged with hashtags and geotags. By searching using hashtags and geotags, tourists' initial expectations are formed. This research utilizes a case study method with a qualitative approach, conducting interviews with 10 individuals through purposive sampling, and content analysis to examine the formation of tourist expectations through hashtags and geotags on Instagram. The results of the study indicate that user interaction through hashtags and geotags plays a crucial role in shaping expectations. Search features such as hashtags and geotags support the formation of tourists' initial expectations, encompassing the geographical overview of a place to nearby accommodations. Additionally, visually appealing content and information contained in tags or captions also play a vital role in users' decision-making