Please use this identifier to cite or link to this item:
Lungu, Laurian
Matthews, Kent
Minford, Patrick
Year of Publication: 
Series/Report no.: 
Cardiff Economics Working Papers E2006/1
Previous attempts at modelling current observed endogenous financial variables in a macroeconomic model have concentrated on only one observed endogenous variable – namely the short-term rate of interest. The solution method for dealing with more than one observed endogenous variable has thus far been computationally intractable. This paper applies a general search algorithm to a macroeconomic model with an observed interest rate and exchange rate to solve the signal extraction problem. The informational advantage of applying the signal extraction algorithm to all the current observed endogenous variables is examined in terms of the implication for policy from the misperceptions of specific macroeconomic shocks.
Rational Expectations
Partial Current Information
Signal Extraction
Macroeconomic modelling
Document Type: 
Working Paper

Files in This Item:

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.