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

Liu, Chunping and Minford, Anthony Patrick Leslie 2014. Comparing behavioural and rational expectations for the US post-war economy. Economic Modelling 43 , pp. 407-415. 10.1016/j.econmod.2014.09.013

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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.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: E History America > E151 United States (General)
H Social Sciences > HC Economic History and Conditions
Uncontrolled Keywords: Behavioural expectation; Rational expectation; Bank crisis; Indirect inference
Additional Information: Available online 27 September 2014
Publisher: Elsevier
ISSN: 0264-9993
Date of First Compliant Deposit: 30 March 2016
Date of Acceptance: 3 September 2014
Last Modified: 30 Jun 2019 13:07

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