Rational Expectations in Price Setting. Tests Based on Norwegian Export Prices

Ingvild Svendsen ()
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Ingvild Svendsen: Statistics Norway, https://www.ssb.no/en/forskning/ansatte

Discussion Papers from Statistics Norway, Research Department

Abstract: This paper uses imperfect competition as a basis for modelling the export price for an aggregated commodity produced by the Norwegian private mainland economy. The long run solution is analysed using a cointegration technique. The dynamics are modelled according to two different approaches; a backward looking error correction model and a forward looking model where rational expectations are assumed. The dynamic structure of the forward looking model is derived from a linear quadratic adjustment cost function under rational expectations, but the empirical results do not support this specification. We cannot reject super-exogeneity to be present in the backward looking error correction model. The empirical evidence are thus not consistent with rational expectations.

Keywords: Export price; Imperfect competition; LQAC models; ECM; Cointegration; Rational expectation; Super exogeneity (search for similar items in EconPapers)
JEL-codes: C51 C52 D84 E31 (search for similar items in EconPapers)
Date: 1998-08
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Persistent link: https://EconPapers.repec.org/RePEc:ssb:dispap:226

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