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Full information estimation and stochastic simulation of models with rational expectations
Author(s) -
Fair Ray C.,
Taylor John B.
Publication year - 1990
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.3950050406
Subject(s) - rational expectations , estimation , econometrics , computer science , maximum likelihood , stochastic modelling , mathematical optimization , economics , mathematical economics , mathematics , statistics , management
A computationally feasible method for the full information maximum‐likelihood estimation of models with rational expectations is described in this paper. The stochastic simulation of such models is also described. The methods discussed in this paper should open the way for many more tests of the rational expectations hypothesis within macroeconomic models.