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Expectations Shocks and the Macroeconomy

  • Michael P. Clements
Chapter
Part of the Palgrave Texts in Econometrics book series (PTEC)

Abstract

Survey expectations are used in vector autoregressive models (VARs) to analyse the inter-relationships between expectations and macroeconomic fluctuations. Exogenous (or structural) expectations shocks are identified by using one of the identification schemes reviewed in this chapter, which include short-run restrictions, and selecting shocks to maximize the contribution to the forecast-error variance decomposition of certain variables. In some cases expectations data can be used to capture ‘anticipatory effects’ (as in the fiscal foresight literature) and counter the non-fundamentalness problem. Uncertainty can also be used in place of first-moment expectations in VARs to analyse the relationship between uncertainty and the macroeconomy.

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Copyright information

© The Author(s) 2019

Authors and Affiliations

  • Michael P. Clements
    • 1
  1. 1.ICMA Centre, Henley Business SchoolUniversity of ReadingWheatleyUK

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