Formulating and Estimating Dynamic Linear Rational Expectations Models

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Creator Series Issue number
  • 127
Date Created
  • 1979-11
Abstract
  • This paper describes methods for conveniently formulating and estimating dynamic linear econometric models under the hypothesis of rational expectations. An econometrically convenient formula for the cross-equation rational expectations restrictions is derived. Models of error terms and the role of the concept of Granger causality in formulating rational expectations models are both discussed. Tests of hypothesis of strict econometric exogeneity along the lines of Sim’s are compared with a test that is related to Wu’s.

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Corporate Author
  • Federal Reserve Bank of Minneapolis. Research Department
Publisher
  • Federal Reserve Bank of Minneapolis
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