Formulating and estimating dynamic linear rational expectations models

Lars Peter Hansen; Thomas J. Sargent

doi:10.1016/0165-1889(80)90049-4

Formulating and estimating dynamic linear rational expectations models

Lars Peter Hansen, Thomas J. Sargent

Research output: Contribution to journal › Article › peer-review

Abstract

This paper describes methods for conveniently formulating and estimating dynamic linear econometric models under the hypothesis of rational expectations. An econometrically convenient formula for the cross-equation rational expectations restrictions is derived. Models of error terms and the role of the concept of Granger causality in formulating rational expectations models are both discussed. Tests of the hypothesis of strict econometric exogeneity along the lines of Sims's are compared with a test that is related to Wu's.

Original language	English (US)
Pages (from-to)	7-46
Number of pages	40
Journal	Journal of Economic Dynamics and Control
Volume	2
Issue number	C
DOIs	https://doi.org/10.1016/0165-1889(80)90049-4
State	Published - 1980

ASJC Scopus subject areas

Economics and Econometrics
Control and Optimization
Applied Mathematics

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10.1016/0165-1889(80)90049-4

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title = "Formulating and estimating dynamic linear rational expectations models",

abstract = "This paper describes methods for conveniently formulating and estimating dynamic linear econometric models under the hypothesis of rational expectations. An econometrically convenient formula for the cross-equation rational expectations restrictions is derived. Models of error terms and the role of the concept of Granger causality in formulating rational expectations models are both discussed. Tests of the hypothesis of strict econometric exogeneity along the lines of Sims's are compared with a test that is related to Wu's.",

author = "Hansen, {Lars Peter} and Sargent, {Thomas J.}",

note = "Funding Information: *This research was supported by the Federal Reserve Bank of Minneapolis. The views expressed herein are solely those of the authors and do not necessarily represent the views of the Federal Reserti Bank of Minneapolis or the Federal Reserve System. Helpful comments on an earlier draft were made by John Taylor.",

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AU - Sargent, Thomas J.

N1 - Funding Information: *This research was supported by the Federal Reserve Bank of Minneapolis. The views expressed herein are solely those of the authors and do not necessarily represent the views of the Federal Reserti Bank of Minneapolis or the Federal Reserve System. Helpful comments on an earlier draft were made by John Taylor.

PY - 1980

Y1 - 1980

N2 - This paper describes methods for conveniently formulating and estimating dynamic linear econometric models under the hypothesis of rational expectations. An econometrically convenient formula for the cross-equation rational expectations restrictions is derived. Models of error terms and the role of the concept of Granger causality in formulating rational expectations models are both discussed. Tests of the hypothesis of strict econometric exogeneity along the lines of Sims's are compared with a test that is related to Wu's.

AB - This paper describes methods for conveniently formulating and estimating dynamic linear econometric models under the hypothesis of rational expectations. An econometrically convenient formula for the cross-equation rational expectations restrictions is derived. Models of error terms and the role of the concept of Granger causality in formulating rational expectations models are both discussed. Tests of the hypothesis of strict econometric exogeneity along the lines of Sims's are compared with a test that is related to Wu's.

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ER -

Formulating and estimating dynamic linear rational expectations models

Abstract

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