Econometric Analysis of Non-Uniqueness in Rational Expectations Models (eBook)

Front Cover 1
The Econometric Analysis of Nonuniqueness in Rational Expectations Models 4
Copyright Page 5
Table of Contents 8
INTRODUCTION TO THE SERIES 6
INTRODUCTION 12
Chapter 1. A Probabilistic Introduction to Rational Expectations 16
1.1. Introduction 16
1.2. The probabilistic framework 17
1.3. Information 20
1.4. Martingales and martingale differences 23
1.5. Linear processes 26
1.6. Rational prediction errors 30
1.7. Afinal remark 32
References 34
Chapter 2. The Non-Uniqueness Problem 36
2.1. The Muth model and its generalizations 36
2.2. The Cagan hyperinflation model 43
2.3. Uniqueness.parametric non-uniqueness and non-parametric non-uniqueness 55
2.4. Conclusion 65
References 67
Chapter 3. Reduction of Single-Equation Models 70
3.1. The geneml univariate model 70
3.2. Prediction errors and revision processes 72
3.3. The reduced fonn 75
3.4. The non-uniqueness problem: a general overview 83
3.5. Linear solutions 84
3.6. lliustrations 89
3.7. Rational expectations versus perfect foresight 96
3.8. A concluding remark 99
References 100
Chapter 4. Reduction of Multiple Equations Models 102
4.1. Models without expectations of future variables 102
4.2. The Cagan multivariate model 104
4.3. A model with current and future expectations 113
4.4. The general model 130
4.5. Particular solutions 143
References 153
Chapter 5. Identification of Rational Expectations Models 154
5.1. The identification problem 154
5.2. Dynamic models without expectations of future variables 172
5.3. Dynamic models with future expectations 199
5.4. Conclusion 211
References 213
Chapter 6. Estimation of Rational Expectations Models 214
6. 1. The Lucas critique 214
6.2. A simple model 217
6.3. Dynamic models without expectations of future variables 230
6.4. Dynamic models with future expectations 237
References 245
Index of Subjects 246
Index of Authors 248