IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Partial Current Information and Signal Extraction in a Rational Expectations Macroeconomic Model: A Computational Solution

Previous attempts at modelling current observed endogenous financial variables in a macroeconomic model have concentrated on only one observed endogenous variable - namely the short-term rate of interest. The solution method for dealing with more than one observed endogenous variable has thus far been computationally intractable. This paper applies a general search algorithm to a macroeconomic model with an observed interest rate and exchange rate to solve the signal extraction problem. The informational advantage of applying the signal extraction algorithm to all the current observed endogenous variables is examined in terms of the implication for policy from the misperceptions of specific macroeconomic shocks.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Cardiff University, Cardiff Business School, Economics Section in its series Cardiff Economics Working Papers with number E2006/1.

in new window

Length: 29 pages
Date of creation: Jan 2006
Date of revision:
Publication status: Published in Economic Modelling , 25 (2) , March 2008, pp. 255-273
Handle: RePEc:cdf:wpaper:2006/1
Contact details of provider: Postal: Aberconway Building, Colum Drive, CARDIFF, CF10 3EU
Phone: +44 (0) 29 20874417
Fax: +44 (0) 29 20874419
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Barro, Robert J, 1980. "A Capital Market in an Equilibrium Business Cycle Model," Econometrica, Econometric Society, vol. 48(6), pages 1393-1417, September.
  2. Matthews, K. G. P. & Minford, A. P. L. & Blackman, S. C., 1994. "An algorithm for the solution of non-linear forward rational expectations models with current partial information," Economic Modelling, Elsevier, vol. 11(3), pages 351-358, July.
  3. Benassy, Jean-Pascal, 1999. "Analytical solutions to a structural signal extraction model: Lucas 1972 revisited," Journal of Monetary Economics, Elsevier, vol. 44(3), pages 509-521, December.
  4. Sargent, Thomas J., 1991. "Equilibrium with signal extraction from endogenous variables," Journal of Economic Dynamics and Control, Elsevier, vol. 15(2), pages 245-273, April.
  5. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
  6. Jean-Pascal Benassy, 2001. "The Phillips Curve and Optimal Policy in a Structural Signal Extraction Model," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(1), pages 58-74, January.
  7. Minford, Patrick & Webb, Bruce, 2005. "Estimating large rational expectations models by FIML--some experiments using a new algorithm with bootstrap confidence limits," Economic Modelling, Elsevier, vol. 22(1), pages 187-205, January.
  8. Minford, A P L & Peel, D A, 1983. "Some Implications of Partial Current Information Sets in Macroeconomic Models Embodying Rational Expectations," The Manchester School of Economic & Social Studies, University of Manchester, vol. 51(3), pages 235-49, September.
  9. repec:sae:niesru:v:114:y::i:1:p:58-68 is not listed on IDEAS
  10. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-34, June.
  11. Pearlman, Joseph & Currie, David & Levine, Paul, 1986. "Rational expectations models with partial information," Economic Modelling, Elsevier, vol. 3(2), pages 90-105, April.
  12. Budd, Alan & Dicks, Geoffrey & Holly, Sean & Keating, Giles & Robinson, Bill, 1984. "The London Business School econometric model of the UK," Economic Modelling, Elsevier, vol. 1(4), pages 355-420, October.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cdf:wpaper:2006/1. 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: (Bruce Webb)

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.