Scandinavian Working Papers in Economics

Discussion Papers,
Statistics Norway, Research Department

No 129: Testing Rational Expectations in Vector Autoregressive Models

Søren Johansen and Anders Rygh Swensen ()
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Anders Rygh Swensen: Statistics Norway

Abstract: Assuming that the solutions of a set of restrictions on the rational expectations of future values can be represented as a vector autoregressive model, we study the implied restrictions on the coefficients. Nonstationary behavior of the variables is allowed, and the restrictions on the cointegration relationships are spelled out. In some interesting special cases it is shown that the likelihood ratio statistic can easily be computed.

Keywords: VAR-models; cointegration; rational expectations.

JEL-codes: C32 October 1994

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