Exact Rational Expectations, Cointegration, and Reduced Rank Regression

Soren Johansen () and Anders Rygh Swensen
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Anders Rygh Swensen: University of Oslo

No 07-29, Discussion Papers from University of Copenhagen. Department of Economics

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.

New Economics Papers: this item is included in nep-ecm
Date: 2007-11
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Working Paper: Exact rational expectations, cointegration, and reduced rank regression (2007)
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