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Are Policy Variables Exogenous?

The Econometric Implications of Learning while Maximizing

  • Book
  • © 1991

Overview

Authors:
  1. Balazs Horvath

    1. International Monetary Fund, USA
      KOPINT-DATORG, Budapest, Hungary

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Part of the book series: Lecture Notes in Economics and Mathematical Systems (LNE, volume 364)

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Table of contents (6 chapters)

  1. Front Matter

    Pages I-XII
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  2. Introduction

    • Balazs Horvath
    Pages 1-15

  3. A Paradigmatic Example

    • Balazs Horvath
    Pages 16-42

  4. Econometric Implications

    • Balazs Horvath
    Pages 43-71

  5. Simulation

    • Balazs Horvath
    Pages 72-110

  6. Tests for Exogeneity

    • Balazs Horvath
    Pages 111-126

  7. Summary, Directions for Future Research

    • Balazs Horvath
    Pages 127-132

  8. Back Matter

    Pages 133-164
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Keywords

About this book

1. 1 Motivation and Definition of Topic To provide motivation and to help define the topic of this study, important links between specific areas of economic theory are first highlighted. (i) Learning and Rational Expectations Theory In a standard rational expectations setting, agents in equilibrium have all the information about the model that enables them to correctly forecast future payoff-relevant variables. What rational expectations theory in its standard form does not tell us is what happens outside a rational expectations equilibrium. Less than complete knowledge of the model is a possible way to represent a situation outside the rational expectations equilibrium. It is natural to assume that agents recognize error and optimally utilize all available external information to improve on their information level, i. e. learn. Based on the information acquired by learning they modify their behavior. Under certain conditions learning steers the economy to the rational expectations equilibrium (Spear (1989), Blume, Bray and Easley (1982), Townsend (1983». This literature shows that learning is a possible mechanism to acquire the necessary level of information that agents are assumed to possess in a rational expectations equilibrium and hence there is a clear link between rational expectations theory and the 2 theory of learning. This fact is also emphasized among others by Friedman (1975), Pesaran (1987) and DeCanio (1979). (ii) Rational Expectations and Econometrics The equilibrium consequences of the rational expectations hypothesis are discussed in a considerable body of literature - cf.

Authors and Affiliations

  • International Monetary Fund, USA

    Balazs Horvath

  • KOPINT-DATORG, Budapest, Hungary

    Balazs Horvath

Bibliographic Information

  • Book Title: Are Policy Variables Exogenous?

  • Book Subtitle: The Econometric Implications of Learning while Maximizing

  • Authors: Balazs Horvath

  • Series Title: Lecture Notes in Economics and Mathematical Systems

  • DOI: https://doi.org/10.1007/978-3-642-58211-0

  • Publisher: Springer Berlin, Heidelberg

  • eBook Packages: Springer Book Archive

  • Copyright Information: Springer-Verlag Berlin Heidelberg 1991

  • Softcover ISBN: 978-3-540-54287-2Published: 28 August 1991

  • eBook ISBN: 978-3-642-58211-0Published: 06 December 2012

  • Series ISSN: 0075-8442

  • Series E-ISSN: 2196-9957

  • Edition Number: 1

  • Number of Pages: XII, 162

  • Topics: Economic Theory/Quantitative Economics/Mathematical Methods

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