Rejections of orthogonality in rational expectations models: Further Monte Carlo results for an extended set of regressors

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Publication date
1987
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Elsevier
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Abstract
It is well known that many rationality tests do not have the correct sizes if innovations in the explanatory series are correlated with the regressand and the explanatory series are substantially autocorrelated. We argue, by considering somewhat more general data generating processes and models, that the importance of the over-rejections may have been over-emphasized.
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