I review here the modeling of the expectation formation process and discuss related econometric issues in current structural macroeconomic models. The discussion includes benchmark models assuming rational expectations, extensions based on allowing for sunspots, news, sticky information, as well as models that abandon the REH to use learning, heuristics, or subjective expectations.
Milani, F. (2012), "The Modeling of Expectations in Empirical DSGE Models: A Survey", Balke, N., Canova, F., Milani, F. and Wynne, M. (Ed.) DSGE Models in Macroeconomics: Estimation, Evaluation, and New Developments (Advances in Econometrics, Vol. 28), Emerald Group Publishing Limited, Bingley, pp. 3-38. https://doi.org/10.1108/S0731-9053(2012)0000028004Download as .RIS
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