12:00
Monetary Policy under Behavioral Expectations: Theory and Experiment
Matthias Weber (University of Amsterdam)

Expectations play a crucial role in modern macroeconomic models. We replace the common assumption of rational expectations in a New Keynesian framework by the assumption that expectations are formed according to a heuristics switching model that has performed well in earlier experiments. We show how the economy behaves under these assumptions with a special focus on inflation volatility. Then we derive implications for monetary policy. We compare the results of the behavioral model to the results arising from full rationality and conduct a learning to forecast experiment to test the opposing theoretical predictions in the laboratory.

(Joint work with Cars Hommes and Domenico Massaro)

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12:50
Valuing Malaria Morbidity: Results from a Global Meta-Analysis
Mehmet Kutluay (VU University Amsterdam)

The risk of malaria transmission worldwide is expected to increase with climate change.  This makes it  important,  from an economics perspective,  to focus on the  costs of illness and  the benefits of  avoiding  malaria.    To  this  end,  we analyze  the  factors  that  explain  willingness to  pay  (WTP)  to  avoid  malaria  morbidity  by  summarizing  the  valuation  literature  via  a meta-analysis.  A previous meta-analysis on malaria is improved by extending the database, introducing  new explanatory  variables and using more sophisticated  analytical  tools.   These analytical  tools include comparing multiple  regression models via a cross-validation  exercise, to quantify  best fit.   These  regressions show that  revealed preferences, as opposed to stated preferences, significantly  lowers mean  WTP values.    No  significant  differences are detected for policies that  either prevent  (pre-morbidity)  or treat  malaria  (post-morbidity).    We  add two new results to the morbidity  literature.   1) Age  has a non-linear impact  on mean WTP (increasing between 33 and 54 year-olds) and 2) WTP decreases if malaria policies target com- munities instead of individual households. These results provide policy-makers with important information on the dynamics behind the benefits of malaria interventions.

Field: Environmental economics/ Health economics