ON THE ROLE OF EXPECTATIONS IN A DYNAMIC KEYNESIAN MACROECONOMIC MODEL

A simple Keynesian macroeconomic disequilibrium model with rationing i s considered. This paper investigates the influence of different expec tations hypotheses (regarding next period's goods prices) on the model 's dynamic behavior when intertemporal substitution effects exist. Whi le the bifurcation behavior is not qualitatively influenced when expec tations are formed according to adaptive expectations or an unweighted -averages hypothesis, the dynamic behavior of the model can be changed in an essential way when pattern-recognition expectations are assumed . So-called perfect cyclic expectations can turn a previously chaotica lly moving economy into a system with a low-periodic motion in particu lar cases. Copyright (C) 1996 Elsevier Science Ltd.