Measures of Fit for Rational Expectations Models: A Survey

71 Pages Posted: 15 Sep 2000

See all articles by Tom Engsted

Tom Engsted

University of Aarhus - CREATES

Date Written: July 2000

Abstract

This survey provides a detailed description of some of the recent theoretical and empirical literature on rational expectations econometrics. The survey pays special attention to non-stationarity of the data, and to the various methods for evaluating rational expectations models that have been developed as alternatives to the classical statistical approach of testing overidentifying restrictions. These methods have become very popular and widely used in empirical research. We provide an illustration using Danish stock market data, and we summarize the many results obtained recently using these measures in areas as diverse as stock prices, the term structure of interest rates, exchange rates, consumption and saving, the balance of payments, tax-smoothing, hyperinflation, and linear quadratic adjustment cost models for inventories, labour demand, and money demand.

JEL Classification: B41, C32, C52, G12

Suggested Citation

Engsted, Tom, Measures of Fit for Rational Expectations Models: A Survey (July 2000). Available at SSRN: https://ssrn.com/abstract=238694 or http://dx.doi.org/10.2139/ssrn.238694

Tom Engsted (Contact Author)

University of Aarhus - CREATES ( email )

School of Economics and Management
Building 1322, Bartholins Alle 10
DK-8000 Aarhus C
Denmark

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