Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/65837
Authors: 
Liu, Chunping
Minford, Patrick
Year of Publication: 
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

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