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Rational Expectation Hypothesis: An Application of the Blanchard and Khan Approach

  • Tito Moreira

    ()

    (Universidade Católica de Brasília)

  • Geraldo Souza

    ()

    (Universidade de Brasília)

  • Charles Almeida

    ()

    (Tribunal de Contas da União)

This paper uses the solution of the linear difference model under rational expectation of Blanchard and Kahn (1980) to test the validity of the inflation stickiness and the Rational Expectation Hypotheses for the Brazilian economy during the period from 06/95 to 09/02. Using the Fuhrer-Moore model and GMM we find evidence favoring both hypothesis.

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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 3 (2004)
Issue (Month): 22 ()
Pages: 1-9

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Handle: RePEc:ebl:ecbull:eb-04c10008
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  1. Roberts John M., 2005. "How Well Does the New Keynesian Sticky-Price Model Fit the Data?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-39, September.
  2. Jeff Fuhrer & George Moore, 1993. "Inflation persistence," Finance and Economics Discussion Series 93-17, Board of Governors of the Federal Reserve System (U.S.).
  3. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  4. Mankiw, N Gregory, 2001. "The Inexorable and Mysterious Tradeoff between Inflation and Unemployment," Economic Journal, Royal Economic Society, vol. 111(471), pages C45-61, May.
  5. Taylor, John B, 1979. "Staggered Wage Setting in a Macro Model," American Economic Review, American Economic Association, vol. 69(2), pages 108-13, May.
  6. Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-11, July.
  7. McCallum, Bennett T, 1976. "Rational Expectations and the Natural Rate Hypothesis: Some Consistent Estimates," Econometrica, Econometric Society, vol. 44(1), pages 43-52, January.
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