Towards a behavioural foundation of macroeconomics [Elektronische Ressource] / vorgelegt von Johannes Kaiser
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Towards a behavioural foundation of macroeconomics [Elektronische Ressource] / vorgelegt von Johannes Kaiser

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Towards a BehaviouralFoundation of MacroeconomicsInaugural-Dissertationzur Erlangung des Grades eines Doktorsder Wirtschafts- und Gesellschaftswissenschaftendurch dieRechts- und Staatswissenschaftliche Fakult¨atder Rheinischen Friedrich-Wilhelms-Universit¨at Bonnvorgelegt vonDiplom-Wirtschaftsingenieur Johannes Kaiseraus Frankfurt am Main2009Tag der mu¨ndlichen Pru¨fung: . .2009Dekan: Prof. Dr. Christian HillgruberErstreferent: Prof. Dr. Dr. h. c. mult. Reinhard SeltenZweitreferent: Prof. Dr. Armin FalkDiese Dissertation ist auf dem Hochschulschriftenserver der ULB Bonn unterhttp://hss.ulb.uni-bonn.de/diss_online elektronisch publiziert.IIIIIIVExecutive SummaryThis thesis strives to enrich macroeconomic theories with behavioural components.For this purpose, laboratory experiments are conducted to investigate effects ofindividual decision making in a macroeconomic context. First, the interlinksbetween economic policy and the labour market are investigated. Employmentand wages react on policy changes mainly according to theory. Fiscal policyis applied adequately if employment goals are not met, price policy focuses onstability goals. A behavioural explanation for a relatedness of inflation andemployment is derived. The second emphasis lies on exchange rate uncertainty andcurrency trade in a laboratory experiment. Subjects fail to predict the direction ofexchange rate movements with more than random accuracy.

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Published 01 January 2009
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Towards a Behavioural
Foundation of Macroeconomics
Inaugural-Dissertation
zur Erlangung des Grades eines Doktors
der Wirtschafts- und Gesellschaftswissenschaften
durch die
Rechts- und Staatswissenschaftliche Fakult¨at
der Rheinischen Friedrich-Wilhelms-Universit¨at Bonn
vorgelegt von
Diplom-Wirtschaftsingenieur Johannes Kaiser
aus Frankfurt am Main
2009Tag der mu¨ndlichen Pru¨fung: . .2009
Dekan: Prof. Dr. Christian Hillgruber
Erstreferent: Prof. Dr. Dr. h. c. mult. Reinhard Selten
Zweitreferent: Prof. Dr. Armin Falk
Diese Dissertation ist auf dem Hochschulschriftenserver der ULB Bonn unter
http://hss.ulb.uni-bonn.de/diss_online elektronisch publiziert.
IIIIIIVExecutive Summary
This thesis strives to enrich macroeconomic theories with behavioural components.
For this purpose, laboratory experiments are conducted to investigate effects of
individual decision making in a macroeconomic context. First, the interlinks
between economic policy and the labour market are investigated. Employment
and wages react on policy changes mainly according to theory. Fiscal policy
is applied adequately if employment goals are not met, price policy focuses on
stability goals. A behavioural explanation for a relatedness of inflation and
employment is derived. The second emphasis lies on exchange rate uncertainty and
currency trade in a laboratory experiment. Subjects fail to predict the direction of
exchange rate movements with more than random accuracy. Therefore currency
trade is mainly guided by interest differences and this kind of speculation is
profitable on average. The third scope is on a Tobin tax on an experimental asset
market as a scheme to cope with excess volatility. Markets with a low tax rate
achieve best results compared with untaxed and highly taxed markets in terms
of efficiency, volatility, and trade volume. The last part derives practical ways
ofmeasuringstatisticalsignificanceofdifferencesinexperimentaldata. (188words)
VVIAbstract
Traditional macroeconomic theories often assume that aggregate economic figures
originate in the behaviour of individuals who optimise their utility. In doing so,
it is casually taken for granted that all agents act self-centered, profit maximis-
ing, and risk neutral. A growing number of studies, mainly from the areas of
microeconomics and psychology, contradicts this presupposition. Through data
gatheredbylaboratoryexperimentsitispossibletoexplorewhetherhumansbehave
according to theoretical predictions. In order to lay a behavioural foundation to
macroeconomic theories, such laboratory experiments can be conducted with a
macroeconomic scope. In this dissertation thesis, three different macroeconomic
topics are investigated experimentally.
One focus is put on the interlinks between economic policy and the labour market.
In a laboratory experiment where players in the role of various institutions interact,
the policy decisions of governments and central banks, their motivations, and
their consequences are analysed with respect to wages and employment. The
reactions of the labour market are mainly in line with theory. If the official
sector’s employment goals are not met, governments tend to increase expenditures,
whereas the decisions of central banks seem rather to be motivated by the
attainment of price goals. The total of the effects observed deliver a new expla-
nationfortheexistenceofarelationshipbetweenemploymentandtheinflationrate.
The second emphasis is on the currency trade decisions of firms in the same
experiment. The players are guided by interest rate differences rather than by
expected exchange rate movements since they are unable to predict exchange rate
changes correctly and thus are ambiguity averse. This results in the absence of
technical trade, highest profits for interest-conforming traders, and pessimistic
expectations concerning the exchange rate. The firms engage in hedging their
production-incurred foreign debts against exchange rate risks. A simple decision
rule is described on the base of which players would have made profits on average.
A transaction tax as proposed by James Tobin is studied in the third part.
Experiments have been conducted with an asset market model that includes
equally endowed traders. In another variant of the model, a transaction tax is
levied on the asset. The trade volume decreases with an increasing tax rate,
and so do the fiscal revenues. Price volatility is reduced drastically under a
tax regime. Although the market efficiency is higher on taxed markets, there
is evidence for lower efficiency with higher tax rates. Concluding it can be
said that the Tobin tax has volatility reducing effects on the market, but the tax
rateshouldbelowtolimitanegativeimpactontradevolumeandmarketefficiency.
The last part derives efficient ways to calculate significance levels of differences in
two independent and in two matched samples. This is done with Fisher-Pitman
permutation tests, which are frequently used throughout this thesis. (470 words)
VIIVIII X