On the Indeterminacy of Determinacy and Indeterminacy
By A. Beyer, Roger E. A. Farmer. Social Science Research Network, 2003
71 citations recorded by the source corpus.
A number of authors have attempted to test whether the US economy is in a determinate or an indeterminate equilibrium. We argue that to answer this question, one must impose a priori restrictions on lag length that cannot be tested. We provide examples of two economic models. Model 1 displays an indeterminate equilibrium, driven by sunspots. Model 2 displays a determinate equilibrium driven by fundamentals. Both models have the same likelihood function and are therefore observationally equivalent.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/94c9cb418599e3465c28bdc3651bb94b2713d696
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In Economics and Econometrics
- Alejandro Justiniano
- Giorgio E. Primiceri
- Francesco Bianchi
- Gary Koop
- Dimitris Korobilis
- K. Petrova
- Luca Benati
- Christiane Baumeister
Citations in the corpus
- The Time-Varying Volatility of Macroeconomic Fluctuations (2006, background): “This is perhaps more so for the model with passive policy, if the identi cation of indeterminacy is rather weak (Beyer and Farmer (2006)).”