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Rational Expectations Dynamics: A Methodological Critique

  • Donald A. R., George
  • Les, Oxley

This paper analyses RE macromodels from the methodological perspective. It proposes a particular property, robustness, which should be considered a necessary feature of scienti cally valid models in economics, but which is absent from many RE macromodels. To restore this property many macroeconomists resort to detailed and implausible assumptions, which take their models a long way from simple Rational Expectations. The paper draws attention to the problems inherent in the technique of local linearisation and concludes by proposing the use of nonlinear models, analysed globally.

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File URL: http://repo.sire.ac.uk/handle/10943/472
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Paper provided by Scottish Institute for Research in Economics (SIRE) in its series SIRE Discussion Papers with number 2013-45.

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Date of creation: 2013
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Handle: RePEc:edn:sirdps:472
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  26. Desai, Meghnad, 1973. "Growth cycles and inflation in a model of the class struggle," Journal of Economic Theory, Elsevier, vol. 6(6), pages 527-545, December.
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