Many papers which have estimated models with forward looking expectations have reported that the magnitude of the coefficients of the expectations term is very large when compared with the effects coming from past dynamics. This has sometimes been regarded as implausible and led to the feeling...

Many macroeconometric models are built to understand business cycles and (possibly) to predict recessions. But the methods applied to assess them are rarely of the form that one learns either whether they provide a good explanation of cycle characteristics or whether they can predict recessions....

This paper considers structural models when both I(1) and I(0) variables are present. It is necessary to extend the traditional classification of shocks into permanent and transitory and we do this by introducing a mixed shock. The extra shocks coming from introducing I(0) variables into a...