Two Models of Measurements and the Investment Accelerator

@article{Sargent1989TwoMO,
  title={Two Models of Measurements and the Investment Accelerator},
  author={Thomas J. Sargent},
  journal={Journal of Political Economy},
  year={1989},
  volume={97},
  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… 

Measures of Fit for Calibrated Models

  • M. Watson
  • Economics
    Journal of Political Economy
  • 1993
This paper suggests a new procedure for evaluating the fit of a dynamic structural economic model. The procedure begins by augmenting the variables in the model with just enough stochastic error so

Forecasting with Measurement Errors in Dynamic Models

TLDR
The paper sets out to illustrate a trade off that confronts forecasters and policymakers when they use data that are measured with error, and shows that for a general class of linear autoregressive forecasting models, the optimal weight to place on a data observation of some age will depend on the measurement error in that data.

Learning about Others' Actions and the Investment Accelerator

A General Equilibrium model of investment is constructed in which the pay-offs of firms depend on each other's actions. It is shown that when these actions are unobservable but aggregate output is in

DSGE Model Validation in a Bayesian Framework: an Assessment

This paper presents the concept of Model Validation applied to a Dynamic Stochastic General equilibrium Model (DSGE). The main problem discussed is the approximation of the statistical representation

Professional forecasters how to understand and exploit them through a DSGE Model

This paper derives a link between the forecasts of professional forecasters and a DSGEmodel. I show that the forecasts of a professional forecaster can be incorporated to the statespace

DSGE Model Evaluation in a Bayesian Framework: an Assessment

This paper presents the concept of Model Validation applied to a Dynamic Stochastic General equilibrium Model (DSGE). The main problem discussed is the approximation of the statistical representation

MEASUREMENT ERRORS IN DYNAMIC MODELS

Static models that are not identifiable in the presence of white noise measurement errors are known to be potentially identifiable when the model has dynamics. However, few results are available for

A State Space Approach To The Policymaker's Data Uncertainty Problem

The paper describes the challenges that uncertainty over the true value of key macroeconomic variables poses for policymakers and the way in which they may form and update their priors in light of a

VAR Estimation and Forecasting When Data Are Subject to Revision

We show that Howrey’s method for producing economic forecasts when data are subject to revision is easily generalized to handle the case where data are produced by a sophisticated statistical agency.
...

References

SHOWING 1-10 OF 32 REFERENCES

Forecasting the Forecasts of Others

This paper explores the formulation and analysis of linear equilibrium models of investment in which learning is perpetual and informationally decentralized firms need never share the same beliefs

Formulating and estimating continuous time rational expectations models

TLDR
The proposal is to express the restrictions imposed by the rational expectations model on the continuous time process generating the observable variables, and the likelihood function of a discrete time sample of observations from this process is obtained.

News or Noise? an Analysis of Gnp Revisions

This paper studies the nature of the errors in preliminary GNP data, It first documents that these errors are large. For example, suppose the prelimimary estimate indicates that real GNP did not

The Estimation of Higher-Order Continuous Time Autoregressive Models

A method is presented for computing maximum likelihood, or Gaussian, estimators of the structural parameters in a continuous time system of higherorder stochastic differential equations. It is argued

Optimal Properties of Exponentially Weighted Forecasts

Abstract The exponentially weighted average can be interpreted as the expected value of a time series made up of two kinds of random components: one lasting a single time period (transitory) and the

Investment and Sales: Some Empirical Evidence

This paper attempts to give a structural interpretation to the distributed lag of sales on investment at the two-digit level in US manufacturing. It first presents a simple model which captures the

RATIONAL EXPECTATIONS IN STATIONARY LINEAR MODELS

Linear time series models have come to dominate the macroeconomic literature on rational expectations and equilibrium business cycle theory. But the explicit solution of such models has generally

Time to Build and Aggregate Fluctuations

This is a student version of the program used for Finn Kydland and Edward Prescott, "Time to Build and Aggregate Fluctuations", Econometrica, vol. 50, pp. 1345-1370, Nov. 1982 Some parameter values

Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence

  • R. Hall
  • Economics
    Journal of Political Economy
  • 1978
Optimization of the part of consumers is shown to imply that the marginal utility of consumption evolves according to a random walk with trend. To a reasonable approximation, consumption itself