Some international evidence on the exogeneity of the ex-ante real rate of interest and the rationality of expectations

Article Abstract:

Robert D. Litterman and Laurence Weiss presented evidence in 1985 covering the exogeneity of ex-ante real interest rate with respect to money, inflation and real output. They concluded that ex-ante real interest rate was not a constant but dependent on a constant and rejected the random walk hypothesis. Aside from the inclusion of supply shocks, data from different countries, sample periods, data definitions and estimation techniques are used to determine the robustness of the Litterman and Weiss results. When supply shocks are omitted from the model, the hypothesis of exogeneity of ex-ante real rate and rationality of expectation is supported.

Interest rates, Macroeconomics, Rational expectations (Economics)

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Multiple equilibria and rules of thumb

Article Abstract:

Two Keynesian models with production externality and endogenize expectations were analyzed to evaluate their effectiveness in illustrating issues related to business cycle. The two models showed that nominal shocks create a business cycle that moves an economy between paths convergent and equilibrium. Backward or forwarward looking expectations are created depending on the preference of economic agents.

Economics, Research and Development in the Social Sciences and Humanities, Analysis, Equilibrium (Economics), Keynesian economics

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Credibility and political business cycles

Article Abstract:

A model describing political business cycle is presented. The model is based on partisanship and credibility arguments which govern pre-election behavior of inflation, output and money growth. The approach incorporates elections and macroeconomic effects into governmental reputation. The model exhibits forecasts similar with those of earlier manipulative models.

Business, Political aspects

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