Exact Rational Expectations , Cointegration , and Reduced Rank Regression

@inproceedings{Johansen2017ExactRE,
  title={Exact Rational Expectations , Cointegration , and Reduced Rank Regression},
  author={S. S. Johansen and Anders Rygh},
  year={2017}
}
We interpret the linear relations from exact rational expectations models as restrictions on the parameters of the statistical model called the cointegrated vector autoregressive model for non-stationary variables. We then show how reduced rank regression, Anderson (1951), plays an important role in the calculation of maximum likelihood estimation of the… CONTINUE READING