Two Models of Measurements and the Investment Accelerator

  title={Two Models of Measurements and the Investment Accelerator},
  author={Thomas J. Sargent},
  journal={Journal of Political Economy},
  pages={251 - 287}
  • T. Sargent
  • Published 1 April 1989
  • Economics
  • Journal of Political Economy
This paper describes two models of an agency that is collecting and reporting observations on a dynamical linear stochastic economy. The first is a "classical" model, with the agency reporting data that are the sum of a vector of "true" variables and a vector of measurement errors that are orthogonal to the true variables. The second is a model of an agency that uses an optimal filtering method to construct least-squares estimates of the true variables. These two models of the reporting agency… 

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