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Linear rational-expectations models with lagged expectations: A synthetic method

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  • Meyer-Gohde, Alexander

Abstract

This paper contains a solution and an estimation method for linear rational-expectations models with lagged expectations. The solution method is a synthetic approach, combining state-space and infinite-MA representations with a simple system of linear equations. The advantage lies in the particular combination of methods from the literature, providing faster execution, more general applicability, and more straightforward usage than existing algorithms. Bayesian estimation methods are employed without the Kalman filter using a recursive algorithm to evaluate the likelihood function and are used to compare small-scale sticky-information and sticky-price DSGE models. Standard truncation methods are shown to not generally be innocuous.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 34 (2010)
Issue (Month): 5 (May)
Pages: 984-1002

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Handle: RePEc:eee:dyncon:v:34:y:2010:i:5:p:984-1002

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Web page: http://www.elsevier.com/locate/jedc

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Keywords: Lagged expectations Linear rational-expectations models Sticky prices Sticky information Likelihood estimation;

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References

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Citations

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Cited by:
  1. Herings P. Jean-Jacques & Peeters Ronald & Yang Michael S., 2009. "Piracy on the internet: Accommodate it or fight it? A dynamic approach," Research Memoranda 034, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
  2. Jan-Oliver Menz & Lena Vogel, 2009. "A Detailed Derivation of the Sticky Price and Sticky Information New Keynesian DSGE Model," Macroeconomics and Finance Series 200902, Hamburg University, Department Wirtschaft und Politik.
  3. N. Gregory Mankiw & Ricardo Reis, 2010. "Imperfect Information and Aggregate Supply," NBER Working Papers 15773, National Bureau of Economic Research, Inc.
  4. Carrillo, Julio A., 2009. "Sticky information vs. Backward-looking indexation: Inflation inertia in the U.S," Research Memoranda 008, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
  5. Carrillo, Julio A., 2012. "How well does sticky information explain the dynamics of inflation, output, and real wages?," Journal of Economic Dynamics and Control, Elsevier, vol. 36(6), pages 830-850.
  6. Ricardo Reis, 2009. "A Sticky-Information General-Equilibrium Model for Policy Analysis," NBER Working Papers 14732, National Bureau of Economic Research, Inc.
  7. Lena Dräger, 2011. "Endogenous Persistence with Recursive Inattentiveness," Macroeconomics and Finance Series 201103, Hamburg University, Department Wirtschaft und Politik.
  8. Alexander Meyer-Gohde, 2011. "Sticky Information and Determinacy," SFB 649 Discussion Papers SFB649DP2011-006, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  9. Yao, Fang, 2009. "Time-dependent pricing and New Keynesian Phillips curve," Discussion Paper Series 1: Economic Studies 2009,08, Deutsche Bundesbank, Research Centre.
  10. Verona, Fabio & Wolters, Maik H., 2012. "Sticky Information Models in Dynare," Dynare Working Papers 11, CEPREMAP, revised Apr 2013.
  11. Hong Lan & Alexander Meyer-Gohde, 2011. "Solving DSGE Models with a Nonlinear Moving Average," SFB 649 Discussion Papers SFB649DP2011-087, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  12. Alexander Meyer-Gohde, 2008. "The Natural Rate Hypothesis and Real Determinacy," SFB 649 Discussion Papers SFB649DP2008-054, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  13. Fang Yao, 2009. "Non-constant Hazard Function and Inflation Dynamics," SFB 649 Discussion Papers SFB649DP2009-030, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  14. Mehmet Fatih, Ekinci, 2010. "Inattentive Consumers and Exchange Rate Volatility," MPRA Paper 26472, University Library of Munich, Germany, revised 31 Oct 2010.
  15. Lena Dräger, 2010. "Why don't people pay attention? Endogenous Sticky Information in a DSGE Model," Macroeconomics and Finance Series 201002, Hamburg University, Department Wirtschaft und Politik.

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