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Working Paper
The short-run relation between growth and inflation in Latin America: a quasi rational or consistent expectations approach
Hanson, James A. (1978)
International Finance Discussion Papers , Paper 118

Working Paper
When does determinacy imply expectational stability?
Bullard, James B.; Eusepi, Stefano (2009)
In the recent literature on monetary and fiscal policy design, adoption of policies that induce both determinacy and learnability of equilibrium has been considered fundamental to economic stabilization. We study the connections between determinacy of rational expectations equilibrium, and expectational stability or learnability of that equilibrium, in a general class of purely forward-looking models. We ask what types of economic assumptions drive differences in the necessary and sufficient conditions for the two criteria. We apply our result to a relatively general New Keynesian model. Our ...
Working Papers , Paper 2008-007

Working Paper
The empirical failure of the expectations hypothesis of the term structure of bond yields
Sarno, Lucio; Thornton, Daniel L.; Valente, Giorgio (2005)
This paper tests the expectations hypothesis (EH) using US monthly data for bond yields spanning the 1952-2003 sample period and ranging in maturity from 1 month to 10 years. We apply the Lagrange multiplier test developed by Bekaert and Hodrick (2001) and extend it to increase the test power: (a) by introducing economic variables as conditioning information; and (b) by using more than two bond yields in the model and testing the EH jointly on more than one pair of yields. While the conventional bivariate procedure provides mixed results, the more powerful testing procedures suggest rejection ...
Working Papers , Paper 2003-021

Working Paper
The role of expectations in U. S. inflation dynamics
Fuhrer, Jeffrey C. (2011)
A growing body of literature examines alternatives to the rational expectations hypothesis in applied macroeconomics. This paper continues this strand of research by examining the role survey expectations play in the inflation process and reports three principal findings. One, short-run inflation expectations appear to play a significant role in explaining U.S. inflation over the past 20?25 years. Two, long-run expectations generally do not appear to have a direct influence on U.S. inflation over the same period, although these longer expectations enter indirectly as a key determinant of the ...
Working Papers , Paper 11-11

Working Paper
Forecast bias in two dimensions
Croushore, Dean (2012)
Economists have tried to uncover stylized facts about people?s expectations, testing whether such expectations are rational. Tests in the early 1980s suggested that expectations were biased, and some economists took irrational expectations as a stylized fact. But, over time, the results of tests that led to such a conclusion were reversed. In this paper, we examine how tests for bias in expectations, measured using the Survey of Professional Forecasters, have changed over time. In addition, key macroeconomic variables that are the subject of forecasts are revised over time, causing problems ...
Working Papers , Paper 12-9

Working Paper
Two practical algorithms for solving rational expectations models
Brayton, Flint (2011)
This paper describes the E-Newton and E-QNewton algorithms for solving rational expectations (RE) models. Both algorithms treat a model's RE terms as exogenous variables whose values are iteratively updated until they (hopefully) satisfy the RE requirement. In E-Newton, the updates are based on Newton's method; E-QNewton uses an efficient form of Broyden's quasi-Newton method. The paper shows that the algorithms are reliable, fast enough for practical use on a mid-range PC, and simple enough that their implementation does not require highly specialized software. The evaluation of the ...
Finance and Economics Discussion Series , Paper 2011-44

Discussion Paper
Consistent estimation of higher order adjustment and expectations models: estimation of rational lags by initial condition parameterization
Havenner, Arthur M. (1975)
Special Studies Papers , Paper 62

Report
Can U.S. monetary policy fall (again) into an expectation trap?
Armenter, Roc; Bodenstein, Martin (2005)
We provide a tractable model to study monetary policy under discretion. We restrict our analysis to Markov equilibria. We find that for all parametrizations with an equilibrium inflation rate of about 2 percent, there is a second equilibrium with an inflation rate just above 10 percent. Thus, the model can simultaneously account for the low and high inflation episodes in the United States. We carefully characterize the set of Markov equilibria along the parameter space and find our results to be robust, suggesting that expectation traps are more than just a theoretical curiosity.
Staff Reports , Paper 229

Working Paper
Stationary representations, cointegration, and rational expectations with an application to the forward foreign exchange market
Boucher, Janice L. (1991)
FRB Atlanta Working Paper , Paper 91-6

Working Paper
Monetary policy under rational expectations with multiperiod wage stickiness and an economy-wide credit market
Hoehn, James G. (1987)
A reconsideration of the role of monetary policy in a multiperiod sticky-wage model that incorporates rational expectations and displays the natural rate property.
Working Papers (Old Series) , Paper 8716

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