Abstract
This paper analyses RE macromodels from the methodological perspective.
It proposes a particular property, robustness, which should
be considered a necessary feature of scientiÖcally valid models in economics,
but which is absent from many RE macromodels. To restore
this property many macroeconomists resort to detailed and implausible
assumptions, which take their models a long way from simple Rational
Expectations. The paper draws attention to the problems inherent
in the technique of local linearisation and concludes by proposing
the use of nonlinear models, analysed globally.
It proposes a particular property, robustness, which should
be considered a necessary feature of scientiÖcally valid models in economics,
but which is absent from many RE macromodels. To restore
this property many macroeconomists resort to detailed and implausible
assumptions, which take their models a long way from simple Rational
Expectations. The paper draws attention to the problems inherent
in the technique of local linearisation and concludes by proposing
the use of nonlinear models, analysed globally.
| Original language | English |
|---|---|
| Publisher | Edinburgh School of Economics Discussion Paper Series |
| Number of pages | 19 |
| Publication status | Published - 2013 |
Publication series
| Name | ESE Discussion Papers |
|---|---|
| No. | 217 |