Unobserved Rational Expectations and the German Hyperinflation with Endogenous Money Supply
A Kalman filtering technique is employed to test the convergent expectation hypothesis in the great German hyperinflation when the money supply is endogenously determined. After converting the model structure to a state space form, the parameters are estimated via minimization of a Gaussian likelihood function. The result is then used in a filter- smoother combination to yield smoothed estimates of the state variable associated with the arbitrary constant of the rational expectations solution. Bo th para-metric and nonparametric tests lead us to reject the null hypothesis of convergent expectations. Copyright 1987 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Volume (Year): 28 (1987)
Issue (Month): 1 (February)
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