Tests for bounded rationality with a linear dynamic model distorted by heterogeneous expectations

Article Abstract:

A methodology for detecting the existence of boundedly rational agents is presented. This methodology, which generalizes rational expectations models by nesting two kinds of expectations, is developed using optimal control theory. Consequently, its likelihood function is built with Kalman filtering using the solution to the model. The application of this methodology in the analysis of the US cattle market in the period 1900-1990 is discussed. The empirical results of the test show that some fraction of economic agents in the market are boundedly rational.

Beef cattle feedlots, Feedlots & Stockyards, Cattle Feedlots, Analysis, Livestock industry, Maximum likelihood estimates (Statistics), Kalman filtering, Cattle industry, Maximum likelihood (Statistics)

---

Limited-dependent rational expectations models with future expectations

Article Abstract:

Limited-dependent rational expectations models with future expectations of the dependent variable are examined. The dependent variable may come in the form of government interventions or institutional arrangements. Computation by backward recursion is shown to be the model's solution when the forcing variables are serially independent. An approximate solution method is used for serially correlated forcing variables. Properties of the approximate solutions are discussed. The results of a few Monte Carlo experiments are reported.

Monte Carlo method, Monte Carlo methods

---

Adaptive learning of rational expectations using neural networks

Article Abstract:

The use of neural networks in modeling adaptive learning of rational expectations is examined.

Computer networks, Neural networks

Similar abstracts:

• Abstracts: International stock market equilibrium with heterogeneous tastes. Can rational expectations sticky-price models explain inflation dynamics
• Abstracts: Trade costs, firms and productivity. International lending of last resort and moral hazard: A model of IMF's catalytic finance
• Abstracts: Normative implications of equilibrium models: homogenous expectations and other artificialities. Minimum wage laws: what does an employment increase imply about output and welfare?
• Abstracts: Keynes on population and economic growth. Income distribution, transaction costs and market fragmentation in informal credit markets
• Abstracts: Causality tests for cross-country panels: a new look at FDI and economic growth in developing countires. Trend breaks in money growth and the money-output relation in the U.S

This website is not affiliated with document authors or copyright owners. This page is provided for informational purposes only. Unintentional errors are possible.