SFB 303 Discussion Paper No. B - 108

Author: Kottmann, Thomas
Title: Simultaneous Equations Linear Models with Forecast Feedback
Abstract: In this paper we first give the specification and stochastic assumptions for the general simultaneous equations model with finitely many (multivariate) expectation terms. For sake of illustration we work out the two-markets cobweb example given in the introduction. The next part contains the relevant results for models with a single expectation term, thereby following the way adopted in Kottmann (1988) for single equation models and arriving at similar conclusions: Under kind-of-ergodicity assumptions and in the influence of the forecast terms is not too large, the OLS-forecasts will converge to (constrained) rational expectations.
Finally, we present the specification and the results for the general model with finitely many expectation terms. The proofs of these results are straightforward generalizations of those given before.
Creation-Date: January 1989
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