Acknowledgement Misspecification in Macroeconomic Theory

Lars Hansen and Thomas Sargent

Monetary and Economic Studies, 2001, vol. 19, issue S1, 213-227

Abstract: We explore methods for confronting model misspecification in macroeconomics. We construct dynamic equilibria in which private agents and policy makers recognize that models are approximations. We explore two generalizations of rational expectations equilibria. In one of these equilibria, decision makers use dynamic evolution equations that are imperfect statistical approximations, and in the other misspecification is impossible to detect even from infinite samples of time-series data. In the first of these equilibria, decision rules are tailored to be robust to the allowable statistical discrepancies. Using frequency domain methods, we show that robust decision makers treat model misspecification like time-series econometricians.

JEL-codes: C53 E52 E61 (search for similar items in EconPapers)
Date: 2001
References: Add references at CitEc
Citations: View citations in EconPapers (47)

Downloads: (external link)
https://www.imes.boj.or.jp/research/papers/english/me19-s1-9.pdf (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:ime:imemes:v:19:y:2001:i:s1:p:213-227

Access Statistics for this article

More articles in Monetary and Economic Studies from Institute for Monetary and Economic Studies, Bank of Japan Contact information at EDIRC.
Bibliographic data for series maintained by Kinken ().