Publication: A comparison of different methods of estimating and testing the especification of rational expectation models with one endogeneus and one exogenus variable
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1992-05
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Abstract
This article considers the theory of the estimation and testing of a model
with one endogenous variable and one exogenous variable, where the structure of
the model assumes a simple rational expectations hypothesis for the determination
of the endogenous variable.
Two methods of estimation are considered, the first the method of Maximum
Likelihood, and the second the method of Instrumental Variables. The first is
asymptotically efficient, the second may be relatively less asymptotically efficient.
The first also has the advantage of suggesting suitable tests for the general form
of the rational expectations model.
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Instrumental variables, Maximum likelihood estimation