Title: Comparing behavioural and rational expectations for the US post-war economy
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 re-estimation the model with behavioural expectations is strongly rejected by the data, whereas the standard rational expectations version passes the tests by a substantial margin.
Publication Year: 2012
Publication Date: 2012-08-01
Language: en
Type: preprint
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