Working paper
Rational sunspots
- Abstract:
-
The instability of macroeconomic variables is usually ruled out by rational expectations. We propose a generalization of the rational expectations framework to estimate possible temporary unstable paths. Our approach yields drifting parameters and stochastic volatility. The methodology allows the data to choose between different possible alternatives: determinacy, indeterminacy and instability. We apply our methodology to US inflation dynamics in the '70s through the lens of a simple New Keyn...
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- Publication status:
- Published
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Bibliographic Details
- Publisher:
- University of Oxford Publisher's website
- Series:
- Department of Economics Discussion Paper Series
- Publication date:
- 2016-03-15
- Paper number:
- 787
Item Description
- Keywords:
- Pubs id:
-
628023
- Local pid:
- pubs:628023
- Deposit date:
- 2020-12-14
Terms of use
- Copyright date:
- 2016
- Rights statement:
- Copyright 2016 The Author(s)
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