Interpreting rational expectations econometrics via analytic function approach

Fei Tan ()

Economics Bulletin, 2017, vol. 37, issue 2, 1182-1190

Abstract: An analytic function method is applied to illustrate Geweke's (2010) three econometric interpretations for a generic rational expectations (RE) model. This delivers an explicit characterization of the model's cross-equation restrictions imposed by the RE hypothesis under each interpretation. It is shown that the degree of identification on the deep parameters is positively related to the strength of the underlying econometric interpretation, and observationally equivalent models may arise once the cross-equation restrictions are interpreted in a minimal sense. This offers important insights into the econometric modeling and evaluation of dynamic economic models.

Keywords: Rational expectations; econometric interpretation; identification; analytic functions (search for similar items in EconPapers)
JEL-codes: C5 C6 (search for similar items in EconPapers)
Date: 2017-06-05
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