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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

  • 354 Want to read
  • 32 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

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 to , Robert 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.-'.


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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.

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