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Cointegration implications of linear rational expectation models

  • Juselius, Mikael

    ()

    (Hanken School of Economics)

This paper derives the cointegration spaces that are implied by linear rational expectations models when data are I(1). The cointegration implications are easy to calculate and can be readily applied to test if the models are consistent with the long-run properties of the data. However, the restrictions on cointegration only form a subset of all the cross-equation restrictions that the models place on data. The approach is particularly useful in separating potentially data-consistent models from the remaining models within a large model family. Moreover, the approach provides useful information on the empirical shock structure of the data.

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File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/0806netti.pdf
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Paper provided by Bank of Finland in its series Research Discussion Papers with number 6/2008.

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Length: 25 pages
Date of creation: 11 Mar 2008
Date of revision:
Handle: RePEc:hhs:bofrdp:2008_006
Contact details of provider: Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.suomenpankki.fi/en/

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  1. Peter N. Ireland, 2004. "Technology Shocks in the New Keynesian Model," NBER Working Papers 10309, National Bureau of Economic Research, Inc.
  2. Hansen, Lars Peter & Sargent, Thomas J., 1980. "Formulating and estimating dynamic linear rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 7-46, May.
  3. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," CEPR Discussion Papers 2139, C.E.P.R. Discussion Papers.
  4. Altug, Sumru, 1989. "Time-to-Build and Aggregate Fluctuations: Some New Evidence," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 889-920, November.
  5. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, March.
  6. Lars Peter Hansen & Thomas J. Sargent, 1981. "Exact linear rational expectations models: specification and estimation," Staff Report 71, Federal Reserve Bank of Minneapolis.
  7. Jeffrey C. Fuhrer, 2000. "Habit Formation in Consumption and Its Implications for Monetary-Policy Models," American Economic Review, American Economic Association, vol. 90(3), pages 367-390, June.
  8. Geert Bekaert & Seonghoon Cho & Antonio Moreno, 2010. "New Keynesian Macroeconomics and the Term Structure," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(1), pages 33-62, 02.
  9. Jordi Galí & Mark Gertler, 1998. "Inflation dynamics: A structural econometric analysis," Economics Working Papers 341, Department of Economics and Business, Universitat Pompeu Fabra.
  10. Campbell, John Y & Shiller, Robert J, 1987. "Cointegration and Tests of Present Value Models," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 1062-88, October.
  11. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  12. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
  13. Johansen, Soren & Swensen, Anders Rygh, 1999. "Testing exact rational expectations in cointegrated vector autoregressive models," Journal of Econometrics, Elsevier, vol. 93(1), pages 73-91, November.
  14. Søren Johansen & Anders Rygh Swensen, 2004. "More on testing exact rational expectations in cointegrated vector autoregressive models: Restricted constant and linear term," Econometrics Journal, Royal Economic Society, vol. 7(2), pages 389-397, December.
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