arXiv 18 Jun 2018 · Finance — Economics · 1 citations (OpenAlex)
arXiv:1806.06657 · PDF · DOI · OpenAlex · Extracted main text
The nonuniqueness of rational expectations is explained: in the stochastic, discrete-time, linear, constant-coefficients case, the associated free parameters are coefficients that determine the public's most immediate reactions to shocks. The requirement of model-consistency may leave these parameters completely free, yet when their values are appropriately specified, a unique solution is determined. In a broad class of models, the requirement of least-square forecast errors determines the parameter values, and therefore defines a unique solution. This approach is independent of dynamical stability, and generally does not suppress model dynamics. Application to a standard New Keynesian example shows that the traditional solution suppresses precisely those dynamics that arise from rational expectations. The uncovering of those dynamics reveals their incompatibility with the new I-S equation and the expectational Phillips curve.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Lubik and Schorfheide (2004) Testing for Indeterminacy: An Application to U.S. Monetary Policy | 1.000 | 6 | 3 | 100% |
| 2 | Shiller (1978) Rational Expectations and the Dynamic Structure of Macroeconomic Models : A Critical Review | 1.000 | 5 | 3 | 100% |
| 3 | Muth (1961) Rational Expectations and the Theory of Price Movements | 0.928 | 4 | 3 | 100% |
| 4 | Blanchard (2018) On the future of macroeconomic models | 0.928 | 4 | 3 | 100% |
| 5 | Taylor (1977) Conditions for Unique Solutions in Stochastic Macroeconomic Models with Rational Expectations | 0.874 | 6 | 2 | 100% |
| 6 | Binder and Pesaran (1997) Multivariate Linear Rational Expectations Models | 0.843 | 4 | 4 | 75% |
| 7 | Ba sar (1989) Some Thoughts on Rational Expectations Models, and Alternate Formulations | 0.644 | 2 | 2 | 100% |
| 8 | Blanchard and Kahn (1980) The Solution of Linear Difference Models under Rational Expectations | 0.644 | 2 | 2 | 100% |
| 9 | Lucas (1976) Econometric Policy Evaluation: A Critique | 0.644 | 2 | 2 | 100% |
| 10 | King and Watson (1998) The Solution of Singular Linear Difference Systems under Rational Expectations | 0.644 | 2 | 2 | 100% |
Showing the top 10 of 43 scored citations.