Factor Analysis in a Model with Rational Expectations

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dc.contributor.author BEYER, Andreas
dc.contributor.author FARMER, Roger E. A.
dc.contributor.author HENRY, Jérôme
dc.contributor.author MARCELLINO, Massimiliano
dc.date.accessioned 2010-12-10T15:04:52Z
dc.date.available 2010-12-10T15:04:52Z
dc.date.issued 2008-01-01
dc.identifier.citation Econometrics Journal, 2008, 11, 2, 271-286 en
dc.identifier.issn 1368-423X
dc.identifier.issn 1368-4221
dc.identifier.uri http://hdl.handle.net/1814/15182
dc.description.abstract DSGE models are characterized by the presence of expectations as explanatory variables. To use these models for policy evaluation, the econometrician must estimate the parameters of expectation terms. Standard estimation methods have several drawbacks, including possible lack or weakness of identification of the parameters, misspecification of the model due to omitted variables or parameter instability, and the common use of inefficient estimation methods. Several authors have raised concerns over the implications of using inappropriate instruments to achieve identification. In this paper, we analyze the practical relevance of these problems and we propose to combine factor analysis for information extraction from large data sets and generalized method of moment to estimate the parameters of systems of forward-looking equations. Using these techniques, we evaluate the robustness of recent findings on the importance of forward-looking components in the equations of a standard New-Keynesian model. en
dc.language.iso en en
dc.title Factor Analysis in a Model with Rational Expectations en
dc.type Article en
dc.neeo.contributor BEYER|Andreas|aut|
dc.neeo.contributor FARMER|Roger E. A.|aut|
dc.neeo.contributor HENRY|Jérôme|aut|
dc.neeo.contributor MARCELLINO|Massimiliano|aut|EUI70008

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