On the role of expectations in a dynamic Keynesian macroeconomic model

A simple Keynesian macroeconomic disequilibrium model with rationing is considered. This paper investigates the influence of different expectations hypotheses (regarding next periodʹs goods prices) on the modelʹs dynamic behavior when intertemporal substitution effects exist. While the bifurcation behavior is not qualitatively influenced when expectations 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 chaotically moving economy into a system with a low-periodic motion in particular cases.