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Expectations hypotheses tests at Long Horizons

  • Barbara Rossi

Many rational expectations models state that an economic variable is determined as the present value of future variables. These restrictions have traditionally been tested on VARs where variables appear either in levels (or cointegrating relationships) or first differences. When variables are highly persistent, commonly used test statistics may lead to overrejections in small samples. Copyright Royal Economic Society 2007

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1368-423X.2007.00222.x
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Article provided by Royal Economic Society in its journal Econometrics Journal.

Volume (Year): 10 (2007)
Issue (Month): 3 (November)
Pages: 554-579

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Handle: RePEc:ect:emjrnl:v:10:y:2007:i:3:p:554-579
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  25. Stock, James H, 1996. "VAR, Error Correction and Pretest Forecasts at Long Horizons," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(4), pages 685-701, November.
  26. James H. Stock, 1991. "Confidence Intervals for the Largest Autoresgressive Root in U.S. Macroeconomic Time Series," NBER Technical Working Papers 0105, National Bureau of Economic Research, Inc.
  27. Gregory, Allan W & Veall, Michael R, 1985. "Formulating Wald Tests of Nonlinear Restrictions," Econometrica, Econometric Society, vol. 53(6), pages 1465-68, November.
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