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Pooling Forecasts in Linear Rational Expectations Models

Listed author(s):
  • Gregor W. Smith

    ()

    (Department of Economics, Queen's University)

Estimating linear rational expectations models requires replacing the expectations of future, endogenous variables either with forecasts from a fully solved model, or with the instrumented actual values, or with forecast survey data. Extending the methods of McCallum (1976) and Gottfries and Persson (1988), I show how to pool these methods and also use actual, future values of these variables to improve statistical efficiency. The method is illustrated with an application using SPF survey data in the US Phillips curve, where the output gap plays a significant role but lagged inflation plays none.

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File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_1129.pdf
File Function: First version 2007
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Paper provided by Queen's University, Department of Economics in its series Working Papers with number 1129.

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Length: 22 pages
Date of creation: Jun 2007
Handle: RePEc:qed:wpaper:1129
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Web page: http://qed.econ.queensu.ca/
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