Nobay, A.R. and Peel, David (1982) The government behavioural constraint in rational expectations models. Economics Letters, 9 (3). pp. 221-227. ISSN 0165-1765Full text not available from this repository.
Models with rationalexpectations typically include state variables whose values are controlled by the government. Hence, the need to specify behavioural rules for the authorities. Our purpose is to show, in the context of a well-known Cagan type model of the demand for money, that the assumption of rationalexpectations imposes the hitherto neglected requirement of rationality of the postulated behaviour of government. In particular the occurance of non-unique solutions highlights the need for a rational choice between these on grounds other than mathematical convenience or ad hoc economic assumptions of minimum variance, terminal conditions etc.
|Journal or Publication Title:||Economics Letters|
|Subjects:||H Social Sciences > HB Economic Theory|
|Departments:||Lancaster University Management School > Economics|
|Deposited On:||17 Jul 2012 14:44|
|Last Modified:||23 Aug 2016 01:16|
Actions (login required)