Formulating and estimating dynamic linear rational expectations models

Lars Peter Hansen, Thomas Sargent

    Research output: Contribution to journalArticle

    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 languageEnglish (US)
    Pages (from-to)7-46
    Number of pages40
    JournalJournal of Economic Dynamics and Control
    Volume2
    Issue number1
    StatePublished - Feb 1980

    Fingerprint

    Rational Expectations
    Econometrics
    Granger Causality
    Error term
    Model
    Restriction
    Rational expectations models
    Rational expectations
    Econometric models
    Granger causality
    Exogeneity

    ASJC Scopus subject areas

    • Control and Optimization
    • Economics and Econometrics

    Cite this

    Formulating and estimating dynamic linear rational expectations models. / Hansen, Lars Peter; Sargent, Thomas.

    In: Journal of Economic Dynamics and Control, Vol. 2, No. 1, 02.1980, p. 7-46.

    Research output: Contribution to journalArticle

    Hansen, Lars Peter ; Sargent, Thomas. / Formulating and estimating dynamic linear rational expectations models. In: Journal of Economic Dynamics and Control. 1980 ; Vol. 2, No. 1. pp. 7-46.
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