Nonlinearities, Disequilibria and Simulation pp 163-196 | Cite as

# A Test of Rational Expectations and the Permanent Income Hypothesis Using Swedish Data 1963–87

Chapter

## Abstract

The beginning of the 1970s was the time of rockets to the moon and of the heyday of Keynesian management of the economy. These seemingly dichotomous subjects are related through the art of macroeconomic modelling: if one could but describe the economy carefully enough, the complex relations of the economy would reveal themselves through the model. Then the ability to fine-tune the economy would become a reality. One of the tools that one imagined would be used in this demand management was that of optimal control theory. Thus economists sought the advice of control engineers.

## Keywords

Kalman Filter Granger Causality Disposable Income Rational Expectation Consumption Function
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© Kumaraswamy Velupillai 1992