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Title:Comparing behavioural and rational expectations for the US post-war economy PDF Logo
Authors:Liu, Chunping
Minford, Patrick
Issue Date:2012
Series/Report no.:Cardiff Economics Working Papers E2012/21
Abstract: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 re-estimation the model with behavioural expectations is strongly rejected by the data, whereas the standard rational expectations version passes the tests by a substantial margin.
Subjects:behavioural expectation
rational expectation
bank crisis
indirect inference
Document Type:Working Paper
Appears in Collections:Cardiff Economics Working Papers, Cardiff Business School, Cardiff University

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