Testing of the rational expectations and structural neutrality hypotheses

In this paper we examine the tests of the new classical rational expectations and structural neutrality hypotheses undertaken by Leiderman (1980) using a model of money growth and unemployment for the United States developed by Barro (1977). Employing the data used in the studies by Barro and Leiderman we are able to construct an alternative model of money growth and unemployment against which the Barro-Leiderman model is rejected along with the joint hypothesis of rational expectations and structural neutrality.     

Disequilibrium models with rational expectations: An application to the UK labour market

This paper develops and estimates an explicit switching model for the U.K. labour market which includes expectations terms in the labour demand function. These expectations terms are dealt with by using the rational expectations hypothesis.     

Empirical evidence on the rational expectations hypothesis using reported expectations

Zusammenfassung Die Arbeit versucht die Hypothese der Rationalen Erwartungen an Hand von empirisch erhobenen Erwartungsdaten zu testen. Diese Vorgangsweise stellt eine Alternative zu den indirekten Testmethoden dar, in denen die Rationalität der Erwartungen durch den Verlauf von objektiven Daten getestet wird (durch Überprüfung einer Erklärungshypothese, in der Erwartungen eine wohl definierte Rolle zukommt). In diesem Fall kann immer nur die gemeinsame Hypothese der Richtigkeit des Modells und der Rationalität der Erwartungen verifiziert werden. Bei Verwendung empirisch gemessener Erwartungen entfällt dieses Problem, doch kommt die Frage der Glaubwürdigkeit der gemessenen Erwartungen hinzu. Eine unvollständige Auskunft darüber gibt eine Untersuchung des Erklärungsbeitrags der Erwartungen und Antizipationen in Konsum und Investitionsfunktionen.Die Hypothese der rationalen Erwartungen kann erst empirisch getest werden, wenn man eine Annahme über die vorhandene Informationsmenge trifft. Als minimaler Informations-stand wird die Kenntnis der vergangenen Entwicklung der zu prognostizierenden Zeitreihe angenommen. Unter dieser Annahme lassen sich die Merkmale Unverzerrtheit, Effizienz, Suffizienz und Konsistenz aus dem Vergleich erwarteter und tatsächlicher Entwicklungen ableiten und empirisch untersuchen.Das empirische Material umfaßt 39 Zeitreihen über die erwartete (geplante) Entwicklung von Umsätzen, investitionen und Preisen aus mehreren Ländern, wobei teilweise Unternehmensbefragungen, teils Konsumentenbefragungen und teilweise Prognosen von Experten zugrundeliegen.     

Testing the rational expectations and structural neutrality hypotheses: Some further results for the U.K.

In this paper we test directly for the restrictions implied by rational expectations and structural neutrality. The tests are direct in the sense that they employ theLucas output equation father than the approximations to it, which replace the lagged output term by lagged monetary shocks, commonly considered in the literature. The direct approach is considered preferable because it avoids these ad hoc approximations and saves significantly on degrees of freedom. The latter permits us to pursue a fully nested testing procedure, which was not possible in earlier work employing postwar U.K. annual data. The main result is that the rational expectations restrictions are not accepted.     

On the limits of rational expectations for policy analysis

In this lecture, I review work addressing three questions. First, are predictions about macro stabilization policies robust to reasonable departures from rational expectations? Second, do people's expectations converge to a particular set of rational expectations? Third, if they do converge, how quickly? I discuss examples from the literature where the answer to the first question is no. The answer to the second question is that learning equilibria converge to the “standard” rational equilibria analyzed in new Keynesian models. Finally, I discuss circumstances under which the answer to the third question is very slowly. In the examples, learning is slowest and policy analysis based on rational expectations is least robust in the face of shocks that render the stakes of getting policy “right” the highest.     

英国彩票基金支持创新的模式值得借鉴

英国政府通过发行彩票设立专门的基金来支持本国的创新和创业,取得显著成效。通过介绍英国科学、技术和艺术彩票基金Nesta的组织和管理方式,总结了其支持科学、技术和艺术领域内的创新和创意活动变为现实产品和服务的做法和经验。英国政府利用Nesta支持国内创新和创意发展的一些做法值得我国参考,如,利用社会资金实现政府目标,以多样化方式支持创新和创意活动,以人和成果转化为支持对象,以及建立专业化的支撑团队等。我国民间资本规模雄厚、科技人力资源丰富等说明我国已具备发行科技彩票的条件,建议借鉴英国Nesta的经验设立我国的科技彩票基金。     

On non-revealing rational expectations equilibrium

It is shown that a non-revealing rational expectations equilibrium may not be coalitionally Bayesian incentive compatible, may not be implementable as a perfect Bayesian equilibrium and may not belong to the weak fine core and thus may not be fully Pareto optimal. These negative results lead us to conclude the non-revealing rational expectations equilibrium is not a sensible solution concept. We wish to thank Dr A. Hadjiprocopis for his invaluable help with the implementation of Latex in a Unix environment. We also thank a referee for several, constructive suggestions.     

Interest-rate policy and rational expectations

The choice of monetary instrument under rational expectations is discussed in a general equilibrium model for the financial sector. It is shown that a supply rule leads to indeterminate asset prices, whereas the prices are determinate under an appropriately formulated interest-rate policy.     

Understanding Markov-switching rational expectations models

We develop a set of necessary and sufficient conditions for equilibria to be determinate in a class of forward-looking Markov-switching rational expectations models and we develop an algorithm to check these conditions in practice. We use three examples, based on the new-Keynesian model of monetary policy, to illustrate our technique. Our work connects applied econometric models of Markov-switching with forward looking rational expectations models and allows an applied researcher to construct the likelihood function for models in this class over a parameter space that includes a determinate region and an indeterminate region.     

On the existence of rational expectations equilibrium

We prove a theorem on the existence of rational expectations general economic equilibrium when agents condition on prices as well as on private information, and maximize the expectation of a state-dependent utility function. The key to the result is a new idealization of what it means for a set of empirical distributions to support agents' expectations. This idealization depends on the notion that agents compare their expectations with continuous versions of the random empirical distributions that are generated by the workings of the economy. The existence theorem covers all strictly concave utility functions, arbitrary distributions of the state variable, and situations in which the dimension of the state variable is large relative to the number of commodities.     

Comparing behavioural and rational expectations for the US post-war economy

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 find that after full reestimation the model with behavioural expectations is strongly rejected by the data, whereas the standard rational expectation version passes the tests by a substantial margin.     

Learning rational expectations in an asset market

Will traders in a risky asset market learn Muthian expectations when they initially lack the necessary information? If some traders learn from their observations, will market dynamics depend only on “fundamentals,” as implied by the Efficient Market Hypothesis? This paper shows that at any finite point in time the answer to these questions is “no”. The context is a constant absolute risk aversion model with two kinds of traders and asymmetric information. The market converges asymptotically to a rational expectations equilibrium where prices depend only on fundamentals and the market is efficient.     

Approximate equilibria in microeconomic rational expectations models

For general equilibrium models in which prices transmit information among asymmetrically informed traders, strict rational expectations approximate equilibria are defined. A state-dependent price function is an ε-equilibrium if, when agents use their own information and that conveyed by prices, aggregate excess demand (in each state of the world) does not exceed ε. For any positive ε, existence requires only very mild assumptions—continuity and compact support. Moreover, there are revealing ε-equilibria for all smooth economies satisfying a dimensionality condition. In an open neighborhood of this case, existence of maximally revealing ε-equilibria holds.     

Confident expectations, rational expectations and the optimal conduct of monetary policy

Under what conditions central banks can afford to deviate from announced targets without losing their reputation is analyzed. For this, the public must have something like ‘confident expectations' vis-a-vis monetary policy and central banks have to behave accordingly. The paper shows that it can be rational for the public and welfare-increasing for the society to retain ‘confident expectations' instead of switching to rational expectations, when central banks have gained long-run reputation. At the end of the paper, alternative optimal money supply rules are compared in a dynamic optimization framework. © 1998 Elsevier Science B.V. All rights reserved.     

Functional rational expectations equilibria in market games

The rational expectations equilibrium (REE) has been criticized as an equilibrium concept in market game environments. Such an equilibrium may not exist generically, or it may introduce unrealistic assumptions about an economic agent’s knowledge or computational ability. We define an REE as a probability measure over uncertain states of nature which exploits all available information in a market game, and which exists for almost all economies. Furthermore, if retrading is allowed, it is possible for agents to compute such a ‘functional rational expectations equilibrium’ using straightforward numerical fixed point algorithms. The approach is demonstrated in a detailed numerical example.     

Strict rational expectations equilibria with diffuseness

For smooth static pure-exchange economies under uncertainty, it is shown that a diffuseness condition on the distribution of traders' characteristics as the state of the world varies permits one to use only a weak dimensionality restriction in the proof of the genericity of existence of strict rational expectations equilibria. A generic result on the amount of information conveyed by equilibrium price functions and comparisons with some examples of nonexistence are given.     

Competitive equilibrium hyperinflation under rational expectations

This paper shows that a competitive equilibrium model, where a representative agent maximizes welfare, expectations are rational and markets are in equilibrium can account for several hyperinflation stylized facts. The theory is built by combining two hypotheses, namely, a fiscal crisis that requires printing money to finance an increasing public deficit and a predicted change in an unsustainable fiscal regime.We thank an anonymous referee for very helpful comments. A. B. Cunha acknowledges financial support from the Brazilian Council of Science and Technology (CNPq).