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Full Information Estimation and Stochastic Simulation of Models with Rational Expectations

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  • Fair, Ray C
  • Taylor, John B

Abstract

A computationally feasible method for the full information maximum-likelihood estimation of models with rational expectations is described in this paper. The stochastic simulation of such models is also described. The methods discussed in this paper should open the way for many more tests of the rational expectations hypothesis within macroeconomic models. Copyright 1990 by John Wiley & Sons, Ltd.

Suggested Citation

  • Fair, Ray C & Taylor, John B, 1990. "Full Information Estimation and Stochastic Simulation of Models with Rational Expectations," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 5(4), pages 381-392, Oct.-Dec..
    • Handle: RePEc:jae:japmet:v:5:y:1990:i:4:p:381-92
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    Cited by:

    1. Fair, Ray C., 2008. "Testing price equations," European Economic Review, Elsevier, vol. 52(8), pages 1424-1437, November.
    2. Sergio Rey & Guy West & Mark Janikas, 2004. "Uncertainty in Integrated Regional Models," Economic Systems Research, Taylor & Francis Journals, vol. 16(3), pages 259-277.
    3. Ray Fair, 2008. "Estimating Term Structure Equations Using Macroeconomic Variables," Yale School of Management Working Papers amz2387, Yale School of Management.
    4. Fair, Ray C., 2014. "How might a central bank report uncertainty?," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 8, pages 1-22.
    5. Ray C. Fair, "undated". "How Might a Central Bank Report Uncertainty"," Cowles Foundation Discussion Papers 1943, Cowles Foundation for Research in Economics, Yale University.
    6. Ray C. Fair, 2000. "Estimated, Calibrated, and Optimal Interest Rate Rules," Cowles Foundation Discussion Papers 1258, Cowles Foundation for Research in Economics, Yale University.
    7. Barrell, Ray & Pina, Alvaro M., 2004. "How important are automatic stabilisers in Europe? A stochastic simulation assessment," Economic Modelling, Elsevier, vol. 21(1), pages 1-35, January.
    8. Ray Fair, 2008. "Estimating Exchange Rate Equations Using Estimated Expectations," Yale School of Management Working Papers amz2499, Yale School of Management.
    9. Yue Ma & Guy Meredith & Matthew S. Yiu, 2002. "A Currency Board Model of Hong Kong," Working Papers 012002, Hong Kong Institute for Monetary Research.
    10. Ray Fair, 2008. "Estimating Term Structure Equations Using Macroeconomic Variables," Yale School of Management Working Papers amz2387, Yale School of Management.
    11. Nerlove, Marc & Fornari, Ilaria, 1998. "Quasi-rational expectations, an alternative to fully rational expectations: An application to US beef cattle supply," Journal of Econometrics, Elsevier, vol. 83(1-2), pages 129-161.
    12. Fair, Ray C., 2014. "How might a central bank report uncertainty?," Economics Discussion Papers 2014-25, Kiel Institute for the World Economy (IfW Kiel).
    13. Fair, Ray C., 2007. "Testing Price Equations," Kiel Working Papers 1342, Kiel Institute for the World Economy.
    14. Dury, Karen & Pina, Alvaro M., 2003. "Fiscal policy in EMU: simulating the operation of the Stability Pact," Journal of Policy Modeling, Elsevier, vol. 25(2), pages 179-206, February.
    15. Ray Fair, 2001. "Optimal Control and Stochastic Simulation of Large Nonlinear Models with Rational Expectations," Yale School of Management Working Papers ysm202, Yale School of Management, revised 24 Sep 2001.
    16. Le, Vo Phuong Mai & Minford, Patrick, 2007. "Optimising indexation arrangements under Calvo contracts and their implications for monetary policy," Cardiff Economics Working Papers E2007/7, Cardiff University, Cardiff Business School, Economics Section.
    17. Ray Fair, 2008. "Estimating Exchange Rate Equations Using Estimated Expectations," Yale School of Management Working Papers amz2499, Yale School of Management.
    18. Ray C. Fair, 2012. "How Should the Fed Report Uncertainty"," Cowles Foundation Discussion Papers 1864, Cowles Foundation for Research in Economics, Yale University.
    19. Barrell, Ray & Dury, Karen & Hurst, Ian, 2003. "International monetary policy coordination: an evaluation using a large econometric model," Economic Modelling, Elsevier, vol. 20(3), pages 507-527, May.
    20. Ray Fair, 2003. "Optimal Control and Stochastic Simulation of Large Nonlinear Models with Rational Expectations," Computational Economics, Springer;Society for Computational Economics, vol. 21(3), pages 245-256, June.
    21. Pesaran, M. Hashem & Samiei, Hossein, 1995. "Limited-dependent rational expectations models with future expectations," Journal of Economic Dynamics and Control, Elsevier, vol. 19(8), pages 1325-1353, November.

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