IDEAS home Printed from https://ideas.repec.org/a/oup/oxecpp/v45y1993i2p169-90.html
   My bibliography  Save this article

Testing the Rational Expectations Hypothesis in Macroeconometric Models

Author

Listed:
  • Fair, Ray C

Abstract

The rational expectations hypothesis is tested by nesting equations without rational expectations within those with rational expectations. This reduces to whether certain variables in an equation are statistically significant. The test can be regarded as an alternative/supplement to Hendry's test of the expectations mechanism but does not require a complete specification of the expectations equation. It provides an easy way to examine the validity of the rational expectations hypothesis in a model such as S. G. Hall and S. G. B. Henry's (1988), where the hypothesis is used but not tested. The author also examines the sensitivity of the properties of a macroeconometric model to the rational expectations hypothesis. Copyright 1993 by Royal Economic Society.

Suggested Citation

  • Fair, Ray C, 1993. "Testing the Rational Expectations Hypothesis in Macroeconometric Models," Oxford Economic Papers, Oxford University Press, vol. 45(2), pages 169-190, April.
  • Handle: RePEc:oup:oxecpp:v:45:y:1993:i:2:p:169-90
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0030-7653%28199304%292%3A45%3A2%3C169%3ATTREHI%3E2.0.CO%3B2-M&origin=bc
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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..
    2. Glenn D. Rudebusch, 2002. "Assessing Nominal Income Rules for Monetary Policy with Model and Data Uncertainty," Economic Journal, Royal Economic Society, vol. 112(479), pages 402-432, April.
    3. Fair, Ray C, 1993. "Inflationary Expectations and Price Setting Behavior," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 8-18, February.
    4. Ray Fair, 2001. "On Modeling the Effects of Inflation Shocks," Yale School of Management Working Papers amz2576, Yale School of Management, revised 01 Aug 2007.
    5. Łyziak, Tomasz & Paloviita, Maritta, 2017. "Formation of inflation expectations in turbulent times : Can ECB manage inflation expectations of professional forecasters?," Research Discussion Papers 13/2017, Bank of Finland.
    6. Weymark, Diana N., 2004. "Economic structure, policy objectives, and optimal interest rate policy at low inflation rates," The North American Journal of Economics and Finance, Elsevier, vol. 15(1), pages 25-51, March.
    7. Tomasz Lyziak, 2016. "Financial crisis, low inflation environment and short-term inflation expectations in Poland," Bank i Kredyt, Narodowy Bank Polski, vol. 47(3), pages 285-300.
    8. Friedrich Heinemann & Katrin Ullrich, 2006. "The Impact of EMU on Inflation Expectations," Open Economies Review, Springer, vol. 17(2), pages 175-195, April.
    9. Golinelli, Roberto & Parigi, Giuseppe, 2014. "Tracking world trade and GDP in real time," International Journal of Forecasting, Elsevier, vol. 30(4), pages 847-862.
    10. Fair Ray C, 2003. "Bootstrapping Macroeconometric Models," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 7(4), pages 1-26, December.
    11. Hugo Benítez-Silva & Debra S. Dwyer, 2003. "What to Expect when you are Expecting Rationality: Testing Rational Expectations using Micro Data," Working Papers wp037, University of Michigan, Michigan Retirement Research Center.
    12. Tomasz Łyziak, 2016. "The impact of financial crisis and low inflation environment on short-term inflation expectations in Poland," NBP Working Papers 235, Narodowy Bank Polski, Economic Research Department.
    13. Tomasz Lyziak, 2010. "Measuring consumer inflation expectations in Europe and examining their forward-lookingness," IFC Bulletins chapters,in: Bank for International Settlements (ed.), The IFC's contribution to the 57th ISI Session, Durban, August 2009, volume 33, pages 155-201 Bank for International Settlements.
    14. Hugo Benítez-Silva & Debra Dwyer & Wayne-Roy Gayle & Thomas Muench, 2008. "Expectations in micro data: rationality revisited," Empirical Economics, Springer, vol. 34(2), pages 381-416, March.
    15. Fernando Alexandre & John Drifill & Fabio Spagniolo, 2001. "Inflation Targeting and Exchange Rate Co-ordination," NIPE Working Papers 9/2001, NIPE - Universidade do Minho.
    16. SOOREEA, Rajeev, 2007. "Are Taylor-Based Monetary Policy Rules Forward-Looking?. An Investigation Using Superexogeneity Tests," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 7(2), pages 87-94.
    17. Alexandre, Fernando & Driffill, John & Spagnolo, Fabio, 2002. "Inflation Targeting, Exchange Rate Volatility and International Policy Coordination," Manchester School, University of Manchester, vol. 70(4), pages 546-569, Special I.
    18. Tomasz Lyziak, 2014. "Inflation expectations in Poland, 2001–2013. Measurement and macroeconomic testing," NBP Working Papers 178, Narodowy Bank Polski, Economic Research Department.
    19. Fair Ray C, 2002. "On Modeling the Effects of Inflation Shocks," The B.E. Journal of Macroeconomics, De Gruyter, vol. 2(1), pages 1-21, April.
    20. W A Razzak, 2002. "Monetary policy and forecasting inflation with and without the output gap," Reserve Bank of New Zealand Discussion Paper Series DP2002/03, Reserve Bank of New Zealand.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:oxecpp:v:45:y:1993:i:2:p:169-90. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum). General contact details of provider: https://academic.oup.com/oep .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.