INTEREST-RATE MODELS FOR US AND UK WITH MIXED INFLATIONARY EXPECTATIONS. A COMPARISON WITH THE RATIONAL AND THE ADAPTIVE SCHEME

Mª Mar Sánchez
Additional contact information
Mª Mar Sánchez: Universidad de Alicante

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: This paper presents a macro-econometric model for medium- and long-term nominal interest rates, assuming heterogeneous economic agents in the market that use different and limited sets of information. It also shows the empirical results obtained from US and UK data, comparing the performance of the model under mixed expectations with, respectively, the performance of the model under rational expectations and under a kind of adaptative expectation. The econometric problems arising in the mixed- and rational-expectation models are tackled by the generalized method of moments. The mixed-expectation model picks up the dynamics of market expectations better than both the rational-expectation model and the adaptative-expectation model, so that it provides the more reasonable model of interest-rate determination.

Pages: 26 pages
Date: 2002-06
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published by Ivie

Downloads: (external link)
http://www.ivie.es/downloads/docs/wpasad/wpasad-2002-05.pdf Fisrt version / Primera version, 2002 (application/pdf)

Related works:
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:ivi:wpasad:2002-05

Access Statistics for this paper

More papers in Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) Contact information at EDIRC.
Bibliographic data for series maintained by Departamento de Edición ().