Formulating and estimating continuous time rational expectations models
By: Lars Peter Hansen and Thomas J. Sargent.
Contributors: Sargent, Thomas J.
Series: Federal Reserve Bank of Minneapolis, Research Department staff report -- 75; Staff report (Federal Reserve Bank of Minneapolis. Research Dept. : Online) -- 75.
Publisher: Federal Reserve Bank of Minneapolis
Published: 1981
Place of publication: [Minneapolis, Minn.]
Language: eng
Format: Electronic resource
Subjects: Rational expectations (Economic theory) -- Mathematical models.; Time-series analysis.
Description: "This paper proposes a method for estimating the parameters of continuous time, stochastic rational expectations models from discrete time observations. The method is important since various heuristic procedures for deducing the implications for discrete time data of continuous time models, such as replacing derivatives with first differences, can sometimes give rise to very misleading conclusions about parameters. Our proposal is to express the restrictions imposed by the rational expectations model on the continuous time process generating the observable variables. Then the likelihood function of a discrete time sample of observations from this process is obtained.  Parameter estimates are computed by maximizing the likelihood function with respect to the free parameters of the continuous time model"--Federal Reserve Bank of Minneapolis web site.
Notes: Title from PDF file as viewed on 10/19/2007.

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