Exact rational expectations, cointegration, and reduced rank regression

Soren Johansen () and Anders Rygh Swensen ()
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Anders Rygh Swensen: School of Economics and Management, University of Aarhus, Denmark and CREATES, Postal: 8000 Aarhus C, Denmark

CREATES Research Papers from School of Economics and Management, University of Aarhus

Abstract: We interpret the linear relations from exact rational expectations models as restrictions on the parameters of the statistical model called the cointegrated vector autoregressive model for non-stationary variables. We then show how reduced rank regression, Anderson (1951), plays an important role in the calculation of maximum likelihood estimation of the restricted parameters.

Keywords: Exact rational expectations; Cointegrated VAR model; Reduced rank regression (search for similar items in EconPapers)
JEL-codes: C32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-ets
Date: Written
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Related works:
Working Paper: Exact Rational Expectations, Cointegration, and Reduced Rank Regression (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:aah:create:2007-41

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