Formulating and estimating dynamic linear rational expectations models

Lars Peter Hansen, Thomas J. Sargent

    Research output: Contribution to journalArticlepeer-review


    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 languageEnglish (US)
    Pages (from-to)7-46
    Number of pages40
    JournalJournal of Economic Dynamics and Control
    Issue numberC
    StatePublished - 1980

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Control and Optimization
    • Applied Mathematics


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