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The traditional theory of economic policy of the Tinbergen-Theil-type has come under severe criticism: in the ontological setting of the New Classical Macroeconomics based on the Rational Expectations Hypothesis (REH), economic policy is ineffective or neutral with respect to real variables. In...
Persistent link: https://www.econbiz.de/10010302516
The paper generalizes Feldstein's criticism (Perceived Wealth in Bonds and Social Security, 1976) of Barro's analysis (Are Government Bonds Real Net Wealth?, 1974) for the case that the interest rate exceeds the growth rate. This is done by considering an economy in steady state where all agents...
Persistent link: https://www.econbiz.de/10010308120
A popular interpretation of the Rational Expectations/Efficient Markets hypothesis states that, if the hypothesis holds, then market valuations must follow a random walk. This postulate has frequently been criticized on the basis of empirical evidence. Yet the assertion itself incurs what we...
Persistent link: https://www.econbiz.de/10010309044
In a game with rational expectations, individuals simultaneously refine their information with the information revealed by the strategies of other individuals. At a Nash equilibrium of a game with rational expectations, the information of individuals is essentially symmetric: the same profile of...
Persistent link: https://www.econbiz.de/10010318881
We re-examine the evidence on the new Phillips curve model of Gali and Gertler (Journal of Monetary Economics 1999) using the conditional score test of Kleibergen (Econometrica 2005), which is robust to weak identification. In contrast to earlier studies, we find that US postwar data are...
Persistent link: https://www.econbiz.de/10010318951
In this paper we test the Rational Expectations hypothesis using longitudinal data on expectations and realizations of individual welfare for East Germans in the years following reunification. German reunification was unexpected and delivered a large shock to the future prospects of the...
Persistent link: https://www.econbiz.de/10010262741
This paper analyzes conditions for existence of a strongly rational expectations equilibrium (SREE) in models with private information, where the amount of private information is endogenously determined. It is shown that the conditions for existence of a SREE known from models with exogenously...
Persistent link: https://www.econbiz.de/10010265695
Each worker belongs to either the majority or the minority group and, irrespective of the group she belongs to, can have good or bad work habits. These traits are transmitted from one generation to the next through a learning and imitation process which depends on parents' purposeful investment...
Persistent link: https://www.econbiz.de/10010267690
One empirical argument that has been around for some time and that clearly contra- dicts equity market efficiency is that market prices seem too volatile to be optimal estimates of the present value of future discounted cash flows. Based on this, it is deduced that systematic pricing errors...
Persistent link: https://www.econbiz.de/10010269909
In this note, a class of nonlinear dynamic models under rational expectations is studied. A particular solution is found using a model reference adaptive technique via an extended Kalman filtering algorithm, for which initial conditions knowledge only is required.
Persistent link: https://www.econbiz.de/10010270416