Expectation Formation of Exchange Rate: Experimental Evidence
Acquiring information about expectations is difficult as individuals' beliefs are unobservable. Thus, how expectation forms and how to model expectation is an open question in economic modelling that has been addressed recently by experimental economics. In this article, in order to identify ex...
| Main Authors: | , , |
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| Format: | Article |
| Language: | fas |
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Allameh Tabataba'i University Press
2022-03-01
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| Series: | فصلنامه پژوهشهای اقتصادی ایران |
| Subjects: | |
| Online Access: | https://ijer.atu.ac.ir/article_13278_ef0a78dc9494904e3ae481d1210ada26.pdf |
| _version_ | 1797369284334190592 |
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| author | Maryam Shahlaee Mehdi Pedram Narges Hajimoladarvish |
| author_facet | Maryam Shahlaee Mehdi Pedram Narges Hajimoladarvish |
| author_sort | Maryam Shahlaee |
| collection | DOAJ |
| description | Acquiring information about expectations is difficult as individuals' beliefs are unobservable. Thus, how expectation forms and how to model expectation is an open question in economic modelling that has been addressed recently by experimental economics. In this article, in order to identify expectations, we examine the behaviour of subjects when encountering new exchange rates in an experiment. Furthermore, in this experiment, differences of expectation formation among participants and their relation to cognitive abilities are analysed. To motivate people, incentive payments are used. In our setting, while the rational expectation hypothesis is not supported, the adaptive expectation is not rejected. Agents form their expectations in the same way regardless of their cognitive ability. In this context, individuals overreact to the new quantity of exchange rate which is assumed as a noisy perception. This finding is considered as evidence of emotional behaviours in the exchange market. |
| first_indexed | 2024-03-08T17:44:29Z |
| format | Article |
| id | doaj.art-073e20435e034727a22da0742b089bd9 |
| institution | Directory Open Access Journal |
| issn | 1726-0728 2476-6445 |
| language | fas |
| last_indexed | 2024-03-08T17:44:29Z |
| publishDate | 2022-03-01 |
| publisher | Allameh Tabataba'i University Press |
| record_format | Article |
| series | فصلنامه پژوهشهای اقتصادی ایران |
| spelling | doaj.art-073e20435e034727a22da0742b089bd92024-01-02T10:30:18ZfasAllameh Tabataba'i University Pressفصلنامه پژوهشهای اقتصادی ایران1726-07282476-64452022-03-0127906310310.22054/ijer.2021.61148.98313278Expectation Formation of Exchange Rate: Experimental EvidenceMaryam Shahlaee0Mehdi Pedram1Narges Hajimoladarvish2Ph.D. Student in Monetary economy, Department of Economics, Faculty of Social Sciences and Economics, Alzahra University, Tehran, IranProfessor, Department of Economics, Faculty of Social Sciences and Economics, Alzahra University, Tehran, Iran.Assistant Professor, Department of Economics, Faculty of Social Sciences and Economics, Alzahra University, Tehran, IranAcquiring information about expectations is difficult as individuals' beliefs are unobservable. Thus, how expectation forms and how to model expectation is an open question in economic modelling that has been addressed recently by experimental economics. In this article, in order to identify expectations, we examine the behaviour of subjects when encountering new exchange rates in an experiment. Furthermore, in this experiment, differences of expectation formation among participants and their relation to cognitive abilities are analysed. To motivate people, incentive payments are used. In our setting, while the rational expectation hypothesis is not supported, the adaptive expectation is not rejected. Agents form their expectations in the same way regardless of their cognitive ability. In this context, individuals overreact to the new quantity of exchange rate which is assumed as a noisy perception. This finding is considered as evidence of emotional behaviours in the exchange market.https://ijer.atu.ac.ir/article_13278_ef0a78dc9494904e3ae481d1210ada26.pdfexperimental economyadaptive expectationrational expectationcognitive ability |
| spellingShingle | Maryam Shahlaee Mehdi Pedram Narges Hajimoladarvish Expectation Formation of Exchange Rate: Experimental Evidence فصلنامه پژوهشهای اقتصادی ایران experimental economy adaptive expectation rational expectation cognitive ability |
| title | Expectation Formation of Exchange Rate: Experimental Evidence |
| title_full | Expectation Formation of Exchange Rate: Experimental Evidence |
| title_fullStr | Expectation Formation of Exchange Rate: Experimental Evidence |
| title_full_unstemmed | Expectation Formation of Exchange Rate: Experimental Evidence |
| title_short | Expectation Formation of Exchange Rate: Experimental Evidence |
| title_sort | expectation formation of exchange rate experimental evidence |
| topic | experimental economy adaptive expectation rational expectation cognitive ability |
| url | https://ijer.atu.ac.ir/article_13278_ef0a78dc9494904e3ae481d1210ada26.pdf |
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