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Pooling Forecasts in Linear Rational Expectations Models

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  • Gregor W. Smith

    ()
    (Department of Economics, Queen's University)

Abstract

Estimating linear rational expectations models requires replacing the expectations of future, endogenous variables either with forecasts from a fully solved model, or with the instrumented actual values, or with forecast survey data. Extending the methods of McCallum (1976) and Gottfries and Persson (1988), I show how to pool these methods and also use actual, future values of these variables to improve statistical efficiency. The method is illustrated with an application using SPF survey data in the US Phillips curve, where the output gap plays a significant role but lagged inflation plays none.

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File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_1129.pdf
File Function: First version 2007
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Bibliographic Info

Paper provided by Queen's University, Department of Economics in its series Working Papers with number 1129.

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Length: 22 pages
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:qed:wpaper:1129

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Keywords: rational expectations; recursive projection; Phillips curve;

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  6. James M. Nason & Gregor W. Smith, 2008. "The New Keynesian Phillips curve : lessons from single-equation econometric estimation," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 361-395.
  7. Ross Milbourne & Gregor W. Smith, 1988. "How Informative are Preliminary Announcements of the Money Stock in Canada?," Working Papers 716, Queen's University, Department of Economics.
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  23. Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-47, February.
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  25. Mavroeidis, Sophocles, 2005. "Identification Issues in Forward-Looking Models Estimated by GMM, with an Application to the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(3), pages 421-48, June.
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Cited by:
  1. Sophocles Mavroeidis & Mikkel Plagborg-Møller & James H. Stock, . "Empirical Evidence on Inflation Expectations in the New Keynesian Phillips Curve," Working Paper 84656, Harvard University OpenScholar.
  2. repec:spo:wpecon:info:hdl:2441/6g0gsihsjmn5snc9pb0hlas97 is not listed on IDEAS
  3. Paul Hubert & Harun Mirza, 2014. "Inflation expectation dynamics:the role of past, present and forward looking information," Documents de Travail de l'OFCE 2014-07, Observatoire Francais des Conjonctures Economiques (OFCE).
  4. Gregor W. Smith & James Yetman, 2007. "The Curse of Irving Fisher (Professional Forecasters' Version)," Working Papers 1144, Queen's University, Department of Economics.
  5. James M. Nason & Gregor W. Smith, 2008. "The New Keynesian Phillips curve : lessons from single-equation econometric estimation," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 361-395.

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