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dc.contributor.author Murray, James
dc.date.accessioned 2008-07-08T19:17:23Z
dc.date.available 2008-07-08T19:17:23Z
dc.date.issued 2008-06-13
dc.identifier.uri http://ssrn.com/abstract=1145416 en
dc.identifier.uri http://www.iub.edu/~caepr/RePEc/PDF/2008/CAEPR2008-017.pdf en
dc.identifier.uri http://hdl.handle.net/2022/3152
dc.description.abstract This paper examines how the estimation results for a standard New Keynesian model with constant gain least squares learning is sensitive to the stance taken on agents beliefs at the beginning of the sample. The New Keynesian model is estimated under rational expectations and under learning with three different frameworks for how expectations are set at the beginning of the sample. The results show that initial beliefs can have an impact on the predictions of an estimated model; in fact previous literature has exposed this sensitivity to explain the changing volatilities of output and inflation in the post-war United States. The results indicate statistical evidence for adaptive learning, however the rational expectations framework performs at least as well as the learning frameworks, if not better, in in-sample and out-of-sample forecast error criteria. Moreover, learning is not found to better explain time varying macroeconomic volatility any better than rational expectations. Finally, impulse response functions from the estimated models show that the dynamics following a structural shock can depend crucially on how expectations are initialized and what information agents are assumed to have. en
dc.format.extent 837719 bytes
dc.format.mimetype application/pdf
dc.language.iso en_US en
dc.publisher Center for Applied Economics and Policy Research en
dc.relation.ispartofseries CAEPR Working Papers en
dc.relation.ispartofseries 2008-017 en
dc.relation.isversionof This paper is also available on SSRN and RePEc. en
dc.subject CAEPR en
dc.subject Center for Applied Economics and Policy Research en
dc.subject Learning en
dc.subject expectations en
dc.subject New Keynesian model en
dc.subject maximum likelihood en
dc.subject Monetary economics en
dc.title Initial Expectations in New Keynesian Models with Learning en
dc.type Working Paper en


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