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Comparing behavioural and rational expectations for the US post-war economy

Chunping Liu and A. Patrick Minford

Economic Modelling, 2014, vol. 43, issue C, 407-415

Abstract: The banking crisis has caused a resurgence of interest in behavioural models of expectations in macroeconomics. Here we evaluate behavioural and rational expectations econometrically in a New Keynesian framework, using US post-war data and the method of indirect inference. We find that after full reestimation the model with behavioural expectations is strongly rejected by the data, whereas the standard rational expectation version passes the tests by a substantial margin.

Keywords: Behavioural expectation; Rational expectation; Bank crisis; Indirect inference (search for similar items in EconPapers)
Date: 2014
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Related works:
Working Paper: Comparing Behavioural and Rational Expectations for the US Post-War Economy (2013) Downloads
Working Paper: Comparing behavioural and rational expectations for the US post-war economy (2012) Downloads
Working Paper: Comparing behavioural and rational expectations for the US post-war economy (2012) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:43:y:2014:i:c:p:407-415

DOI: 10.1016/j.econmod.2014.09.013

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