Estimation of Simple Class of Multivariate Rational Expectations Models: A Test of the New Classical Model at a Sectoral Level

Mohammad Pesaran

Empirical Economics, 1991, vol. 16, issue 2, 32 pages

Abstract: This paper extends the results obtained by Pagan (1984) and Turkington (1985) for single equation rational expectations (RE) models to multivariate RE models and shows that the errors-in-variables method and the substitution method discussed in Wickens (1982) lead to exactly the same likelihood function. The paper also considers multivariate RE models with unanticipated variables and includes an empirical application to the problem of testing the natural rate-rational expectations (NR-RE) hypothesis at the disaggregate level using U.S. data over the period 1955-85.

Date: 1991
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Working Paper: ESTIMATION OF SIMPLE CLASS OF MULTIVARIATE RATIONAL EXPECTATIONS MODELS: A TEST OF THE NEW CLASSICAL MODEL AT A SECTORAL LEVEL (1989)
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