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Interpreting Long-run Equilibrium Solutions in Conventional Macro Models: A Comment.

Abstract:

C. M. Kelly (1985) claims that long-run solutions from econometric models may be seriously misleading when expectations variables are erroneously replaced by observed outcomes. It is shown that his results derive uniquely from an invalid exogeneity assumption. All inferences are therefore potentially invalid, illustrated by a case where the long-run is correct while the short-run is biased. Using an encompassing framework, error-variance rankings and related tests distinguishing expectational...

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Authors


David F Hendry More by this author
Adrian J Neale More by this author
Journal:
Economic Journal
Volume:
98
Publication date:
1988
URN:
uuid:0a523b67-8e94-4488-9d83-919d4e3845c2
Local pid:
oai:economics.ouls.ox.ac.uk:10528
Language:
English

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