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Looking Backward and Looking Forward

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  • Gao, Zhengyuan
  • Hafner, Christian

Abstract

Filtering has had a profound impact as a device of perceiving information and deriving agent expectations in dynamic economic models. For an abstract economic system, this paper shows that the foundation of applying the filtering method corresponds to the existence of a conditional expectation as an equilibrium process. Agent-based rational behavior of looking backward and looking forward is generalized to a conditional expectation process where the economic system is approximated by a class of models, which can be represented and estimated without information loss. The proposed framework elucidates the range of applications of a general filtering device and is not limited to a particular model class such as rational expectations.
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Suggested Citation

  • Gao, Zhengyuan & Hafner, Christian, 2019. "Looking Backward and Looking Forward," LIDAM Reprints ISBA 2019057, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
    • Handle: RePEc:aiz:louvar:2019057
    Note: In : Econometrics, vol. 7, no.2, p. article 27 (2019)
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    References listed on IDEAS

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    1. Lars Peter Hansen & Thomas J Sargent, 2014. "Beliefs, Doubts and Learning: Valuing Macroeconomic Risk," World Scientific Book Chapters, in: UNCERTAINTY WITHIN ECONOMIC MODELS, chapter 10, pages 331-377, World Scientific Publishing Co. Pte. Ltd..
    2. anonymous, 2007. "Bank asset growth robust, statistics show," Financial Update, Federal Reserve Bank of Atlanta, vol. 20(2).
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    4. Lars Peter Hansen & Thomas J. Sargent, 2007. "Introduction to Robustness," Introductory Chapters, in: Robustness, Princeton University Press.
    5. Evans, George W & Ramey, Garey, 1992. "Expectation Calculation and Macroeconomic Dynamics," American Economic Review, American Economic Association, vol. 82(1), pages 207-224, March.
    6. D. Stephen G. Pollock, 2018. "Filters, Waves and Spectra," Econometrics, MDPI, vol. 6(3), pages 1-33, July.
    7. D.S.G. Pollock, "undated". "Filters, Waves and Spectra," Discussion Papers in Economics 19/08, Division of Economics, School of Business, University of Leicester.
    8. Lars Peter Hansen, 2007. "Beliefs, Doubts and Learning: Valuing Economic Risk," NBER Working Papers 12948, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Yingxiu Zhao & Wei Zhang & Xiangyu Kong, 2019. "Dynamic Cross-Correlations between Participants’ Attentions to P2P Lending and Offline Loan in the Private Lending Market," Complexity, Hindawi, vol. 2019, pages 1-8, December.
    2. Dvouletý Ondřej & Čadil Jan & Mirošník Karel, 2019. "Do Firms Supported by Credit Guarantee Schemes Report Better Financial Results 2 Years After the End of Intervention?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(1), pages 1-20, January.

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    More about this item

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools

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