Formulating and estimating dynamic linear rational expectations models
AbstractThis paper describes methods for conveniently formulating and estimating dynamic linear econometric models under the hypothesis of rational expectations. An econometrically convenient formula for the cross-equation rational expectations restrictions is derived. Models of error terms and the role of the concept of Granger causality in formulating rational expectations models are both discussed. Tests of hypothesis of strict econometric exogeneity along the lines of Sim’s are compared with a test that is related to Wu’s.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Minneapolis in its series Working Papers with number 127.
Date of creation: 1979
Date of revision:
Publication status: Published in The legacy of Robert Lucas, Jr. (Vol. 2, 1999, pp. 330-369)
Other versions of this item:
- Hansen, Lars Peter & Sargent, Thomas J., 1980. "Formulating and estimating dynamic linear rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 7-46, May.
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