TY  - JOUR
AU  - Lehmann,Bruce N.
TI  - The Role of Beliefs in Inference for Rational Expectations Models
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11758
PY  - 2005
Y2  - November 2005
UR  - http://www.nber.org/papers/w11758
L1  - http://www.nber.org/papers/w11758.pdf
N1  - Author contact info:
Bruce Lehmann
University of California, San Diego
IR/PS
1415 Robinson Building Complex
La Jolla, CA  92093-0519
Tel: 858/534-0945
Fax: 858/534-3939
E-Mail: blehmann@ucsd.edu
AB  - This paper discusses inference for rational expectations models estimated via minimum distance methods by characterizing the probability beliefs regarding the data generating process (DGP) that are compatible with given moment conditions. The null hypothesis is taken to be rational expectations and the alternative hypothesis to be distorted beliefs. This distorted beliefs alternative is analyzed from the perspective of a hypothetical semiparametric Bayesian who believes the model and uses it to learn about the DGP. This interpretation provides a different perspective on estimates, test statistics, and confidence regions in large samples, particularly regarding the economic significance of rejections in rational expectations models.
ER  -