Comparing Behavioural and Rational Expectations for the US Post-War Economy
21 Pages Posted: 28 Sep 2012
Date Written: September 2012
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 reestimation the model with behavioural expectations is strongly rejected by the data, whereas the standard rational expectations version passes the tests by a substantial margin.
Keywords: bank crisis, behavioural expectations, indirect inference, rational expectations
JEL Classification: E17, E37, E47
Suggested Citation: Suggested Citation
Liu, Chunping and Minford, Patrick, Comparing Behavioural and Rational Expectations for the US Post-War Economy (September 2012). CEPR Discussion Paper No. DP9132, Available at SSRN: https://ssrn.com/abstract=2153573
Do you have negative results from your research you’d like to share?
Feedback
Feedback to SSRN
If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday.