A Note on Information Flows and Identification of News Shocks Models
Marco Sorge
Journal of Economics and Econometrics, 2013, vol. 56, issue 1, 28-38
Abstract:
This note points out a hitherto unrecognised identification issue in a class of rational expectations (RE) models with news shocks. We show that different degrees of anticipation (information flows) have strikingly different implications for the identifiability of the underlying structural model, irrespective of its non-fundamental time-series representation. In particular, under full shock anticipation equilibrium reduced forms behave as noisy perfect foresight state motions, which are non-identifiable. As a consequence, the underlying news shocks model fails to be (first-order) identified. The identification failure is illustrated with a New Keynesian model that can be solved analytically.
Keywords: Rational expectations; perfect foresight; news shocks; identification. (search for similar items in EconPapers)
JEL-codes: C1 E32 (search for similar items in EconPapers)
Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (3)
Downloads: (external link)
https://ideas.repec.org/a/eei/journl/v56y2013i1p28-38.html
Full text for ScienceDirect subscribers only
Related works:
Working Paper: A Note on Information Flows and Identification of News Shocks Models (2013) ![Downloads](/downloads_econpapers.gif)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eei:journl:v:56:y:2013:i:1:p:28-38
Access Statistics for this article
More articles in Journal of Economics and Econometrics from Economics and Econometrics Society Contact information at EDIRC.
Bibliographic data for series maintained by Julia van Hove (vanhove@eeri.eu).