Staff Report 69

A Note on Wiener-Kolmogorov Prediction Formulas for Rational Expectations Models

Lars Peter Hansen
Thomas J. Sargent | Consultant

Published September 1, 1981

A prediction formula for geometrically declining sums of future forcing variables is derived for models in which the forcing variables are generated by a vector autoregressive-moving average process. This formula is useful in deducing and characterizing cross-equation restrictions implied by linear rational expectations models.

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