Testing for Stochastic Non-Linearity in the Rational Expectations Permanent Income Hypothesis PDF Download
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Author: Saeed Moshiri Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
The Rational Expectations Permanent Income Hypothesis implies that consumption follows a random walk. However, most empirical tests have rejected the hypothesis. Those empirical tests are based on linear models. If the data generating process is non-linear, conventional tests may not be able to pick up some of the randomness. As a result, inference based on conventional tests can be misleading. This paper tests for the presence of stochastic non-linearity in aggregate consumption of non-durable goods and services, using U.S. and Canadian data. The two major tests applied are a test devised by Brock, Dechert, and Scheinkman, and a test based on an Artificial Neural Network model. The results support (do not reject) the hypothesis that there is no non-linearity in the data. The forecast results, however, suggest that even though the linearity hypothesis is not rejected, the non-linear ANN model tends to outperform the ARIMA model over three different horizons.
Author: Saeed Moshiri Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
The Rational Expectations Permanent Income Hypothesis implies that consumption follows a random walk. However, most empirical tests have rejected the hypothesis. Those empirical tests are based on linear models. If the data generating process is non-linear, conventional tests may not be able to pick up some of the randomness. As a result, inference based on conventional tests can be misleading. This paper tests for the presence of stochastic non-linearity in aggregate consumption of non-durable goods and services, using U.S. and Canadian data. The two major tests applied are a test devised by Brock, Dechert, and Scheinkman, and a test based on an Artificial Neural Network model. The results support (do not reject) the hypothesis that there is no non-linearity in the data. The forecast results, however, suggest that even though the linearity hypothesis is not rejected, the non-linear ANN model tends to outperform the ARIMA model over three different horizons.
Author: Robert E. Lucas Publisher: U of Minnesota Press ISBN: 1452908281 Category : Languages : en Pages : 335
Book Description
Assumptions about how people form expectations for the future shape the properties of any dynamic economic model. To make economic decisions in an uncertain environment people must forecast such variables as future rates of inflation, tax rates, governme.
Author: Ray C. FAIR Publisher: Harvard University Press ISBN: 0674036638 Category : Business & Economics Languages : en Pages : 314
Book Description
Macroeconomics tries to describe and explain the economywide movement of prices, output, and unemployment. The field has been sharply divided among various schools, including Keynesian, monetarist, new classical, and others. It has also been split between theorists and empiricists. Ray Fair is a resolute empiricist, developing and refining methods for testing theories and models. The field cannot advance without the discipline of testing how well the models approximate the data. Using a multicountry econometric model, he examines several important questions, including what causes inflation, how monetary authorities behave and what are their stabilization limits, how large is the wealth effect on aggregate consumption, whether European monetary policy has been too restrictive, and how large are the stabilization costs to Europe of adopting the euro. He finds, among other things, little evidence for the rational expectations hypothesis and for the so-called non-accelerating inflation rate of unemployment (NAIRU) hypothesis. He also shows that the U.S. economy in the last half of the 1990s was not a new age economy.
Author: Lars Peter Hansen Publisher: Princeton University Press ISBN: 0691170975 Category : Business & Economics Languages : en Pages : 453
Book Description
The standard theory of decision making under uncertainty advises the decision maker to form a statistical model linking outcomes to decisions and then to choose the optimal distribution of outcomes. This assumes that the decision maker trusts the model completely. But what should a decision maker do if the model cannot be trusted? Lars Hansen and Thomas Sargent, two leading macroeconomists, push the field forward as they set about answering this question. They adapt robust control techniques and apply them to economics. By using this theory to let decision makers acknowledge misspecification in economic modeling, the authors develop applications to a variety of problems in dynamic macroeconomics. Technical, rigorous, and self-contained, this book will be useful for macroeconomists who seek to improve the robustness of decision-making processes.
Author: Saeed Moshiri
Author: Saeed Moshiri
Author: Marjorie Flavin
Author: Alan E. H. Speight
Author: Eric Dor
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Author: Robert E. Lucas
Author: Truman F. Bewley
Author: Ray C. FAIR
Author: Lars Peter Hansen
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