What is the impact of surprise and anticipated policy changes when agents form expectations using adaptive learning rather than rational expectations? We examine this issue using the standard stochastic real business cycle model with lump-sum taxes. Agents combine knowledge about future policy...

This paper shows that the Ricardian Equivalence proposition can continue to hold when expectations are not rational and are instead formed using adaptive learning rules. In temporary equilibrium, with given expectations, Ricardian Equivalence holds under the standard conditions for its validity...