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2 edition of Rational expectations in an econometric model found in the catalog.

Rational expectations in an econometric model

Stephen Hall

Rational expectations in an econometric model

NIESR model 8.

by Stephen Hall

  • 75 Want to read
  • 12 Currently reading

Published .
Written in English


Edition Notes

Taken from National Institute economic review, vol.114, 1985, pp.58-68.

SeriesNational Institute economic review -- v.114
ID Numbers
Open LibraryOL21653714M


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Rational expectations in an econometric model by Stephen Hall Download PDF EPUB FB2

Rational expectations are the best guess for the future. Rational expectations suggest that although people may be wrong some of the time, on average they will be correct.

In particular, rational expectations assumes that people learn from past mistakes. Rational expectations have implications for economic policy.

Abstract ‘Rational Expectations’ is an equilibrium concept that can be applied to dynamic economic models that have elements of ‘self reference’, that is, models in which the endogenous variables are influenced by the expectations about future values of those variables held by the agents in the model.

Each exploits restrictions on an econometric model imposed by the hypothesis that agents within the model have rational expectations. Please note: This book is out of print, but a scanned copy of the text can be found on Tom Sargent’s website by following this link. The rational expectations critique of econometric policy evaluation has sometimes been interpreted to mean that use of econometric model conditional forecasts in policy formation is pointless or misleading, as this sort of exercise seldom accounts explicitly for endogenous shifts in expectation-formation in reaction to changed policy rules.

Rational Expectations and Econometric Practice was first published in Minnesota Archive Editions uses digital technology to make long-unavailable books once again accessible, and are published unaltered from the original University of Minnesota Press : Thomas J.

Sargent. Rational Expectations and Econometric Practice Book Description: A comprehensive collection of readings published in the literature on rational expectactions in macroeconomics, including Sargent's "Classical Macroeconomic Model" as well as the original papers by Muth that started the rational expectations literature.

Rational Expectations and Econometric Practice by Robert E. Lucas Jr.,available at Book Depository with free delivery worldwide. An alternative proce-dure is to assume that expectations are ra-tional. Although the assumption of rational expectations has received increased attention lately in work with theoretical and small-scale empirical models, ’ it has not yet been applied to large-scale macro-econometric models.

To test the rational expectations hypothesis we need to have an econometric model to generate the mathematical expectation E in equation (4), now interpreted as mathematical expectation rather than the subjective expectation of the investors.

form of an econometric model is the true value. In other words, we accept as the maintained hypothesis that the model is a true description of the system; rational expectations are then the mathematical expectations implied by the model conditional on the information available at the time when expectations must be formed.

In applying the rational expectations hypothesis to generate expectations in an econometric model it is assumed that (1) the model itself is capable of generating reasonable forecasts of all required expectations variables included in the model, and that (2) the economic agents whose behavior is being modeled act as if they form their psychological expectations as conditional mathematical.

forecasts made using econometric models will be free of systematic bias andinformational inefficiencies. This has led many investigators to explore the development of a weaker form of the rational expectations hypothesis that allows for model uncertainty and learning.

Rational Expectations and Econometric Practice: Volume 2 was first published in Assumptions about how people form expectations for the future shape the properties of any dynamic economic model. To make economic decisions in an uncertain environment people must forecast such variables as future rates of inflation, tax rates, government.

Each paper deals with aspects of the problem of making inferences about parameters of a dynamic economic model on the basis of time series observations.

Each exploits restrictions on an econometric model imposed by the hypothesis that agents within the model have rational expectations. Purchase The Econometric Analysis of Non-Uniqueness in Rational Expectations Models, Volume - 1st Edition. Print Book & E-Book.

ISBN  Assumptions about how people form expectations for the future shape the properties of any dynamic economic model. To make economic decisions in an uncertain environment people must forecast such variables as future rates of inflation, tax rates, 4/5(3).

A rational expectations equilibrium is a natural solution concept in a model with expectations. The heuristic reasoning is that outside rational expectations equilibria agents make systematic mistakes; expectations are not confirmed by outcomes in that the expectations are not correct on the average.

rational-expectations forecasts of future short rates under the two regimes can be constructed from the maximum likelihood estimates.

When the response of long rates to short rates is restricted to be this rational-expectations forecast, the residuals have a standard deviation of only basis points. Journal of Economic Dynamics and Control 2 () Q North-Holland ECONOMETRIC POLICY EVALUATION AND OPTIMIZATION UNDER RATIONAL EXPECTATIONS Gregory C.

CHOW* Princeton University, Princeton, NJUSA Methods will be presented to evaluate given economic policies and to find optimal policies using an econometric model under the assumption of rational expectations.

Rational Expectations and Econometric Practice was first published in Minnesota Archive Editions uses digital technology to make long-unavailable books once again accessible, and are published unaltered from the original University of Minnesota Press : Robert E.

Lucas Jr., Thomas J. Sargent. New Classical Economics and Rational Expectations. Much of the difficulty policy makers encountered during the decade of the s resulted from shifts in aggregate supply. Keynesian economics and, to a lesser degree, monetarism had focused on aggregate demand.

Rational Expectations Models in Macroeconomics John B. Taylor. NBER Working Paper No. (Also Reprint No. r) Issued in November NBER Program(s):Economic Fluctuations and Growth This paper is a review of rational expectations models used in macroeconomic research.

Rational Expectations and Econometric Practice was first published in Minnesota Archive Editions uses digital technology to make long-unavailable books once again accessible, and are published unaltered from the original University of Minnesota Press tions about how people form expectations for the future shape the properties of any dynamic economic model.

To. This book brings us up to date on an extremely lively discussion involving the role of expectations, and more particularly rational expectations, in the conduct of stabilization policy Anyone interested in the role of government in economics should read this important book."—C.

Glyn Williams, The Wall Street Review of Books "This is a. Solutions of multivariate Rational Expectations Models - Volume 11 Issue 2 - Laurence Broze, Christian Gouriéroux, Ariane Szafarz.

Robert Lucas was awarded the Nobel Prize in economics “for having developed and applied the hypothesis of rational expectations, and thereby having transformed macroeconomic analysis and deepened our understanding of economic policy.” More than any other person in the period from toRobert Lucas revolutionized macroeconomic theory.

Rational Expectations and Econometric Practice, Volume 2 [Robert E. Lucas Jr., Thomas J. Sargent] on *FREE* shipping on qualifying offers. Rational Expectations and Econometric Practice, Volume 2Format: Paperback.

Following the work of Zabel (), Maccini (), Reagan (), and Reagan and Weitzman (), Blinder () laid the foundations of the rational expectations equilibrium inventory model. To the three reasons for holding inventories in the model of Holt et al. was added (d) optimal pricing.

Get this from a library. Rational expectations and econometric practice. [Robert E Lucas, Jr.; Thomas J Sargent;] -- Assumptions about how people form expectations for the future shape the properties of any dynamic economic model.

To make economic decisions. model, employed this assumption. Rational, or model-consistent, expectations are identi-cal to the forecasts produced by the macroeconomic model in which the expectations are used.

This assump-tion has been used in many macroeconomic models developed in the past fifteen years and is one option for the formation of expectations used in FRB/US. rational expectations and the expectations model of the term structure, Shiller [29] also conducts formal econometric tests using a single—equation estimation approach.-'.

Get this from a library. The econometric analysis of non-uniqueness in rational expectations models. [Laurence Broze; Ariane Szafarz] -- This book is devoted to the econometric analysis of linear multivariate rational expectation models.

It shows that the interpretation of multiplicity in terms of ""new degrees of freedom"" is. Overview. This lecture introduces the concept of rational expectations equilibrium. To illustrate it, we describe a linear quadratic version of a famous and important model due to Lucas and Prescott.

This paper is one of a small number of research articles that kicked off the rational expectations revolution. We follow Lucas and Prescott by employing a setting that is readily.

Rational Expectations and Econometric Practice by Robert E. Lucas, Thomas J. Sargent starting at $ Rational Expectations and Econometric Practice has 3 available editions to buy at Half Price Books Marketplace. Third Edition. Author: Thomas J. Sargent; Publisher: Princeton University Press ISBN: Category: Business & Economics Page: View: DOWNLOAD NOW» A fully expanded edition of the Nobel Prize–winning economist's classic book This collection of essays uses the lens of rational expectations theory to examine how governments anticipate and plan for inflation, and provides.

A simple econometric model of the U.S. is estimated subject to a set of rational expectations restrictions using a minimum distance estimation technique.

The estimated model is then used to calculate optimal monetary policy rules to stabilize fluctuations in output and inflation, and to derive a long run tradeoff between price stability and.

The paper investigates an econometric method for selecting macroeconomic policy rules when expectations are formed rationally.

A simple econometric model of the U.S. is estimated subject to a set of rational expectations restrictions using a minimum distance estimation technique.

The estimated model is then used to calculate optimal monetary. “An Econometric Business Cycle Model with Rational Expectations: Policy Evaluation Results,” December pdf “Estimation and Control of a Macroeconomic Model with Rational Expectations,” Econometrica, 47 (5), Septemberpp.

An econometric portfolio balance model of an open economy, incorporating exchange rate, price, and current account dynamics, is derived and usual stability conditions do not guarantee a unique rational expectations solution, and several proposals for resolving this situation are considered.

"An Analysis of a Macro-Econometric Model with Rational Expectations in the Bond and Stock Markets," The American Economic Review, September, intro, pdf file.

"On Modeling the Economic Linkages Among Countries," in R. Dornbusch and J. Frenkel (eds.), International Economic Policy: Theory and Evidence, The Johns Hopkins. supply-demand structure of the model were used to examine the feasibility of several policies designed to stabilize farm prices and farmer income.

McCallum (), Wallis (), and Fisher () applied rational expectations to an established econometric model in which expected values.This book deals with exchange-rate determination and the implications of floating rate regimes for the time paths of prices and quantities.

It develops a class of stochastic equilibrium models of the open economy operating under flexible exchange rates, assuming that agents are endowed with rational expectations but do not possess full current.