Monetarism, Rational Expectations, Oligopolistic Pricing, and the MPS Econometric Model

1979 ◽  
Vol 87 (1) ◽  
pp. 57-73 ◽  
Author(s):  
Bennett T. McCallum
Keyword(s):  
Rational Expectations ◽  
Econometric Model ◽  
Oligopolistic Pricing

A NOTE ON MUTH'S RATIONAL EXPECTATIONS HYPOTHESIS: A TIME-VARYING COEFFICIENT INTERPRETATION

2006 ◽  
Vol 10 (3) ◽  
pp. 415-425 ◽  
Author(s):  
P.A.V.B. SWAMY ◽  
GEORGE S. TAVLAS
Keyword(s):  
Rational Expectations ◽  
Econometric Model ◽  
Objective Probability ◽  
Varying Coefficient Models ◽  
Time Varying ◽  
Exact Representation ◽  
Expectations Hypothesis ◽  
Varying Coefficient ◽  
True Model ◽  
Necessary And Sufficient

Under certain interpretations of its coefficients, a specified econometric model is an exact representation of the “true” model, defining the “objective” probability distribution. This note enumerates these interpretations. In the absence of the conditions implied by these interpretations, the econometric model is misspecified. The note shows that model misspecifications prevent the satisfaction of a necessary and sufficient condition for individual expectations to be rational in Muth's sense. Whereas restrictive forms of econometric models can give very inaccurate predictions, this note describes the conditions under which the predictions generated from time-varying coefficient models coincide with the predictions generated from the relevant economic theory.

Supply, Liquidity and Credit: a New Version of the Institute's Domestic Econometric Macromodel

1988 ◽  
Vol 126 ◽  
pp. 32-43 ◽  
Author(s):  
Simon Wren-Lewis
Keyword(s):  
Rational Expectations ◽  
Econometric Model ◽  
Consumer Credit ◽  
Supply Side ◽  
Significant Development ◽  
Personal Consumption ◽  
Policy Simulations ◽  
New Variables ◽  
Company Sector

The forecast presented in chapter 1 was produced with a new version of the Institute's UK econometric model. Model 11 contains a number of new features. The largest number of innovations occur on the ‘supply side’ of the model, including new equations for manufacturing employment, investment, exports, imports prices and average earnings. Two equally important developments involve the interaction between company sector liquidity and decisions about real variables, and between the flow of consumer credit and personal consumption. There are new equations for the exchange rate, unemployment and a host of more minor variables. In all about half of the model's equations have been re-estimated, and 30 new variables added to the model. These changes constitute the largest and most significant development of the Institute's UK model since the introduction of rational expectations with Model 8. This note summarises these changes, and discusses their implications for various standard policy simulations. A full model listing is also published by the Institute.

scholarly journals A Rational Expectations Macro-econometric Model of Pakistan's Monetary Policy since 1970s

1987 ◽  
Vol 26 (4) ◽  
pp. 513-527 ◽  
Author(s):  
M. Aynul Hasan
Keyword(s):  
Monetary Policy ◽  
Financial Institutions ◽  
Rational Expectations ◽  
Econometric Model ◽  
Banking System ◽  
Policy Formation ◽  
Econometric Models ◽  
Free Banking ◽  
Present Decade ◽  
Rapid Transition

Since April 1985 the operations of the entire financial sector in Pakistan have been transformed into a system which is expected to conform to the laws of 1slamic society. Under this system all banks and other financial institutions are supposed to conduct their borrowing and lending according to an interest free Islamic financial system, except for past commitments which may have been carried over in accordance with original commitments! With this rapid transition towards the interest free banking system in Pakistan, the present decade has witnessed the emergence of the State Bank of Pakistan as a key participant in the area of policy formation. Indeed, the greater participation of the governor and the bank has given rise to a considerable amount of discussion and debate over Pakistan's monetary policy among the academics and politicians at home and abroad. To a large extent, this discussion and analysis has been essentially descriptive, being based upon casual observations rather than tightly formulated econometric models. From the viewpoint of understanding Pakistan's economy over the 1970s and 1980s within the framework of a complete macro model, there is a growing need to empirically establish the mechanisms of monetary policy in Pakistan and to determine its impact on such macro-economic variables as real output and employment.

Rational Expectations in an Econometric Model: Niesr Model 8∗

1985 ◽  
Vol 114 ◽  
pp. 58-68 ◽  
Author(s):  
S.G. Hall ◽  
S.G.B. Henry
Keyword(s):  
Rational Expectations ◽  
Econometric Model ◽  
Significant Advance ◽  
Empirical Results ◽  
Economic Behaviour ◽  
Underlying Theory ◽  
Forward Looking

This article summarises research on the role of forward-looking behaviour in important sectors of a macro-econometric model. It is based on the work of a number of researchers at the National Institute over the last two years. Important changes are introduced into many central equations in the model We argue that on grounds of both the underlying theory and the plausibility of the empirical results, this work is a significant advance in explaining dynamic macro-economic behaviour.

Rational Expectations and Inflation

2017 ◽  
Author(s):  
Thomas J. Sargent
Keyword(s):  
World War I ◽  
French Revolution ◽  
Rational Expectations ◽  
Ronald Reagan ◽  
Fiscal Policies ◽  
Economic Policies ◽  
Budget Deficits ◽  
Nobel Lecture ◽  
Economic Decisions ◽  
The French Revolution

This collection of essays uses the lens of rational expectations theory to examine how governments anticipate and plan for inflation, and provides insight into the pioneering research for which the author was awarded the 2011 Nobel Prize in economics. Rational expectations theory is based on the simple premise that people will use all the information available to them in making economic decisions, yet applying the theory to macroeconomics and econometrics is technically demanding. This book engages with practical problems in economics in a less formal, noneconometric way, demonstrating how rational expectations can satisfactorily interpret a range of historical and contemporary events. It focuses on periods of actual or threatened depreciation in the value of a nation's currency. Drawing on historical attempts to counter inflation, from the French Revolution and the aftermath of World War I to the economic policies of Margaret Thatcher and Ronald Reagan, the book finds that there is no purely monetary cure for inflation; rather, monetary and fiscal policies must be coordinated. This fully expanded edition includes the author's 2011 Nobel lecture, “United States Then, Europe Now.” It also features new articles on the macroeconomics of the French Revolution and government budget deficits.

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