Staff Report 74

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Aggregation Over Time and the Inverse Optimal Predictor Problem for Adaptive Expectations in Continuous Time

Lars Peter Hansen
Thomas J. Sargent - Consultant

Published September 1, 1981

Abstract
This paper describes the continuous time stochastic process for money and inflation under which Cagan’s adaptive expectations model is optimal. It then analyzes how data formed by sampling money and prices at discrete points in time would behave.


Published In: International Economic Review (Vol. 24, No. 1, February 1983, pp. 1-20)

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