Self-fulfilling Expectations Research Articles

Time Inconsistency of Monetary Policy and Self-Fulfilling Expectations of Monetary Union Exits

Time Inconsistency of Monetary Policy and Self-Fulfilling Expectations of Monetary Union Exits

Political stability and credibility of currency board

Political stability and credibility of currency board

Balanced-budget fiscal rules and money growth pegging

Balanced-budget fiscal rules and money growth pegging

Equilibrium indeterminacy and sunspot tales

Equilibrium indeterminacy and sunspot tales

Path dependence, self-fulfilling expectations, and carbon lock-in

Path dependence, self-fulfilling expectations, and carbon lock-in

Promoting Platform Takeoff and Self-Fulfilling Expectations: Field Experimental Evidence

A platform might have the potential to bring enormous value to its users. However, without a well-orchestrated launch strategy that coordinates a sufficient number of users onto the platform, this potential will not be realized. The theoretical literature predicts that one approach to coordinating platform take-off is to influence the market’s subjective focal expectations of the future installed base of users. This paper reports on a field experiment investigating the causal role of subjective expectations in the launch of a new platform venture, in which invitations to join a newly launched platform were sent to 16,349 individuals. The invitations included randomized statements regarding the size of the future expected installed base (along with disclosures of the current installed base). I find that simple, subjective, uncommitted, and relatively costless statements broadcasted by the platform with the goal of influencing market expectations were indeed able to influence platform takeoff and overcome an initial chicken-and-egg problem. These broadcasted subjective statements regarding future installed base had a larger influence on adoption rates than did disclosures of the true current installed base during early adoption. However, these subjective statements of expected future installed base ceased to have any effect once the true current installed base grew large. I discuss implications for the promotion, marketing, and evangelism of new platform ventures. This paper was accepted by Duncan Simester, marketing.

Currency stability using blockchain technology

Currency stability using blockchain technology

Financial development, income and income inequality

The aim of this paper is twofold. Firstly, we present a model in which both income and income inequality are jointly determined in a counter-cyclical manner via self-fulfilling expectation. We argue that multiple equilibria can arise in the presence of inelastic labor demand, a minimum investment requirement, and imperfections in the credit market. In one equilibrium, the market wage and labor income are both low. Young agents who become entrepreneurs work harder and save more than young agents who become depositors. As a result, the equilibrium is characterized by low-income and high-income inequality. In another equilibrium, the market wage and labor income are both high. Young agents supply the same amount of labor and save the same. As a result, the equilibrium is characterized by high-income and low-income inequality. Secondly, we present different dynamic scenarios predicted by the model and analyze the role of self-fulfilling expectations. The paper ends by providing some policy recommendations on how the coordination of agents’ expectations about labor market conditions and how improvements in financial development may affect the long-run income and income inequality.

Understanding the resource curse: A large-scale experiment on corruption in Tanzania

Corruption is considered an important driver of the resource curse in developing countries. Based on a large-scale field experiment in Tanzania, this paper studies how the salience of future natural resource revenues shapes beliefs, attitudes, and behavior. We find some evidence that information about the discovery of natural gas causes people to expect more corruption in the future, but no evidence of the information making people at present more willing to engage in corruption and dishonest behavior or less trusting. The findings do not support the idea of self-fulfilling expectations about future corruption. The paper provides a rich set of results on the determinants of corruption and trust in a development context, which may contribute to a better understanding of the micro-foundations of the resource curse.

Promoting Platform Takeoff and Self-Fulfilling Expectations: Field Experimental Evidence

Promoting Platform Takeoff and Self-Fulfilling Expectations: Field Experimental Evidence

The Equilibrium Value of Bitcoin

The Equilibrium Value of Bitcoin

What future for history dependence in spatial economics?

What future for history dependence in spatial economics?

Platform Takeoff and Self-Fulfilling Expectations: Field Experimental Evidence

Platform Takeoff and Self-Fulfilling Expectations: Field Experimental Evidence

What to expect when everyone is expecting: Self-fulfilling expectations and asset-pricing puzzles

What to expect when everyone is expecting: Self-fulfilling expectations and asset-pricing puzzles

Dynamic effects of consumption externalities

This paper examines the dynamic effects of consumption externalities in Bosi and Seegmuller (J Math Econ 46:475–492, 2010). We show that only the patient agent holds the entire capital stock at the steady state, while the impatient agent works to finance his consumption. Our main result states that consumption externalities represent the main mechanism that explains the emergence of endogenous fluctuations due to self-fulfilling expectations. Finally, consumption externalities promote the appearance of deterministic cycles of period two.

Taming Inflation: Drivers and Options

Taming Inflation: Drivers and Options

Monetary Policy, Self-Fulfilling Expectations and the U.S. Business Cycle

I estimate a medium-scale New-Keynesian model and relax the conventional assumption that the central bank adopted an active monetary policy by pursuing inflation and output stability over the entire post-war period. Even after accounting for a rich structure, I find that monetary policy was passive prior to the Volcker disinflation. Sunspot shocks did not represent quantitatively relevant sources of volatility. By contrast, such passive interest rate policy accommodated fundamental productivity and cost shocks that de-anchored inflation expectations, propagated via self-fulfilling inflation expectations and constituted the primary sources of the run-up in inflation from the 1960s through the late 1970s.

Monetary Policy, Self-Fulfilling Expectations and the U.S. Business Cycle

Monetary Policy, Self-Fulfilling Expectations and the U.S. Business Cycle

On the Purchasing Power of Money in an Exchange Economy

On the Purchasing Power of Money in an Exchange Economy

Economics of Crisis

Economics of Crisis