Comparing Behavioural and Rational Expectations for the US Post-War Economy

A. Patrick Minford

NBS Discussion Papers in Economics from Economics, Nottingham Business School, Nottingham Trent University

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 nd 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: Behavioural expectation; rational expectation; bank crisis; indirect inference. (search for similar items in EconPapers)
JEL-codes: C10 C32 (search for similar items in EconPapers)
Date: 2013-02
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http://www.ntu.ac.uk/__data/assets/pdf_file/0018/3 ... -the-us-post-war.pdf First version, 2013 (application/pdf)

Related works:
Journal Article: Comparing behavioural and rational expectations for the US post-war economy (2014)
Working Paper: Comparing behavioural and rational expectations for the US post-war economy (2012)
Working Paper: Comparing behavioural and rational expectations for the US post-war economy (2012)
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