Macroeconomic Rationality and Lucas' Misperceptions Model: Further Evidence from Forty-One Countries
AbstractSeveral researchers have examined Lucas's misperceptions model as well as various propositions derived from it within a cross-section empirical framework. The cross-section approach imposes a single monetary policy regime for the entire period. Our paper innovates on existing tests of those rational expectations propositions by allowing the simultaneous effect of monetary and short run aggregate supply (oil price) shocks on output behavior and the employment of advanced panel econometric techniques. Our empirical findings, for a sample of 41 countries over 1949 to 1999, provide evidence in favor of the majority of rational expectations propositions.
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Bibliographic InfoPaper provided by University of Connecticut, Department of Economics in its series Working papers with number 2003-26.
Length: 22 pages
Date of creation: Aug 2003
Date of revision:
Publication status: Published in Journal of Economics and Business, May-June 2004
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Lucas's misperception model; rational expectations propositions; real shocks; panel data;
Find related papers by JEL classification:
- E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
- E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-08-31 (All new papers)
- NEP-MAC-2003-08-31 (Macroeconomics)
- NEP-MON-2003-08-31 (Monetary Economics)
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