IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Estimating dynamic rational expectations models when the trend specification is uncertain

Listed author(s):
  • Timothy Cogley

This paper explores various strategies for estimating rational expectations models when the trend specification is uncertain. One approach modified the likelihood function in order to reduce the influence of low-frequency dynamics. Hansen and Sargent (1993) conjectured that this would have little cost in correctly specified models and would improve estimated in mis-specified models. This paper confirms the first part of their conjecture but not the second. Contrary to intuition, the effects of trend-specification errors are spread across the entire frequency domain and are not confined to low-frequencies. Hence, deleting low-frequency dynamics does not remove the specification error. Another approach seeks a representation of the approximating model that does not condition on a specification of the trend, and it estimated parameters by GMM. This approach compares favorably with MLS when the trend is correctly specified and is superior when the trend is mis-specified.

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 Federal Reserve Bank of San Francisco in its series Working Papers in Applied Economic Theory with number 96-01.

in new window

Date of creation: 1996
Handle: RePEc:fip:fedfap:96-01
Contact details of provider: Postal:
P.O. Box 7702, San Francisco, CA 94120-7702

Phone: (415) 974-2000
Fax: (415) 974-3333
Web page:

More information through EDIRC

Order Information: Email:

No references listed on IDEAS
You can help add them by filling out this form.

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:fip:fedfap:96-01. 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: (Federal Reserve Bank of San Francisco Research Library)

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.