Near-Rational Expectations: How Far Are Surveys from Rationality?
No 2014/06, EUSP Department of Economics Working Paper Series from European University at St. Petersburg, Department of Economics
New simple forms of deviation from rational expectations (RE) are suggested: strong near-rational expectations (SNRE) and weak near-rational expectations (WNRE). The medium-scale DSGE model is estimated with the RE, the SNRE and the WNRE. It is estimated with and without observed from the surveys expectations. The quality of out-of-sample forecasts is estimated. It is shown that near-rational concept produce the same advantages as learning without its disadvantages. However, the DSGE model with the RE and the observed expectations with measurement errors can produce results that only slightly worse than with the WNRE. The influence of the observed expectations on the forecasting quality is analyzed.
Keywords: DSGE; out of sample forecasts; survey expectations; near-rational expectations (search for similar items in EconPapers)
JEL-codes: E32 E37 E47 (search for similar items in EconPapers)
Pages: 40 pages
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Journal Article: Near-Rational Expectations: How Far are Surveys from Rationality? (2017)
Working Paper: Near-Rational Expectations: How Far are Surveys from Rationality? (2017)
Working Paper: Near-Rational Expectations: How Far are Surveys from Rationality? (2016)
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