Testing exact rational expectations in cointegrated vector autoregressive models

TY - JOUR

T1 - Testing exact rational expectations in cointegrated vector autoregressive models

AU - Johansen, Søren

AU - Swensen, Anders Rygh

PY - 1999

Y1 - 1999

N2 - This paper considers the testing of restrictions implied by rational expectations hypotheses in a cointegrated vector autoregressive model for I(1) variables. If the rational expectations involve one-step-ahead observations only and the coefficients are known, an explicit parameterization of the restrictions is found, and the maximum-likelihood estimator is derived by regression and reduced rank regression. An application is given to a present value model.

AB - This paper considers the testing of restrictions implied by rational expectations hypotheses in a cointegrated vector autoregressive model for I(1) variables. If the rational expectations involve one-step-ahead observations only and the coefficients are known, an explicit parameterization of the restrictions is found, and the maximum-likelihood estimator is derived by regression and reduced rank regression. An application is given to a present value model.

KW - Faculty of Social Sciences

KW - VAR model

KW - cointegration

U2 - 10.1016/S0304-4076(99)00004-4

DO - 10.1016/S0304-4076(99)00004-4

M3 - Journal article

SN - 0304-4076

VL - 93

SP - 73

EP - 91

JO - Journal of Econometrics

JF - Journal of Econometrics

IS - 1

ER -