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

Chunping Liu () and A. Patrick Minford

No 9132, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 expectations version passes the tests by a substantial margin.

Keywords: bank crisis; behavioural expectations; indirect inference; rational expectations (search for similar items in EconPapers)
JEL-codes: E17 E37 E47 (search for similar items in EconPapers)
Date: 2012-09
New Economics Papers: this item is included in nep-mac
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Related works:
Journal Article: Comparing behavioural and rational expectations for the US post-war economy (2014) Downloads
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
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