Edwin Burmeister

Mathematical theories of economic growth

One-sector growth models technological change in the one-sector model money and economic growth a preview of multisector growth models Leontief models and alternative techniques neoclassical multisector models without joint production turnpike theorems and efficient economic growth optimal economic growth.

Arbitrage Pricing Theory as a Restricted Nonlinear Multivariate Regression Model Iterated Nonlinear Seemingly Unrelated Regression Estimates

By replacing the unknown random factors of factor analysis with observed macroeconomic variables, the arbitrage pricing theory (APT) is recast as a multivariate nonlinear regression model with across-equation restrictions. An explicit theoretical justification for the inclusion of an arbitrary, well-diversified market index is given. Using monthly returns on 70 stocks, iterated nonlinear seemingly unrelated regression techniques are employed to obtain joint estimates of asset sensitivities and their associated APT risk “prices.” Without the assumption of normally distributed errors, these estimators are strongly consistent and asymptotically normal. With the additional assumption of normal errors, they are also full-information maximum likelihood estimators. Classical asymptotic nonlinear nested hypothesis tests are supportive of the APT with measured macroeconomic factors.

Kalman filtering estimation of unobserved rational expectations with an application to the German hyperinflation

Abstract The assumption that rational expectations always lie on a convergent path is subject to an empirical test using the German hyperinflation data. The estimation technique employs a Kalman filtering algorithm. After presenting a brief background for the convergent expectations problem and a derivation of the various model specifications, a generalized expectations model and its attendant Kalman filtering estimation technique are discussed. Additional estimation details and empirical results are then presented. Based on an assumption of normally distributed errors, the null hypothesis of convergent paths is rejected in all situations involving a deterministic specification of the evolution of the unobserved parameter which characterizes the convergent path. The same null hypothesis is rejected in four of the six cases corresponding to a stochastic specification of the evolution of the unobserved parameter which characterizes the convergent path. A discussion of these findings, their economic significance, and suggestions for further research concludes the paper.

Estimation of Unobserved Expected Monthly Inflation Using Kalman Filtering

Hamilton developed a technique for estimating financial market expectations of inflation based on the observed time-series properties of interest rates and inflation. The technique is based on a state-space representation derived from an underlying vector autoregressive process of the expected real interest rate and the expected inflation rate on lagged expectations and lagged values of the observed Treasury bill rate and the actual inflation rate. This article extends this work in two ways. First, we use monthly data, since the quarterly data used by Hamilton may obscure many interesting movements, especially for determining the role of inflationary expectations in stock price movements, and this is one of our primary interests. Second, we employ an alternative method developed by Burmeister and Wall for estimating the parameters of the model, and this method leads to a different identification proof. Both approaches share the use of the Kalman filter to estimate the unobserved variables, in this case, e...

The Nature and Implications of the Reswitching of Techniques

I. Introduction, 526. — II. Alternative discrete capital models, 528. — III. Reswitching in two-good technologies, 531. — IV. Reswitching in a general capital model, 538. — V. Some additional implications for economic theory, 546.

Two estimators for the apt model when factors are measured

Abstract Non-linear SUR and ITSUR techniques are proposed for the estimation of the APT and the CAPM when the factors are observed. These techniques estimate all of the parameters of the model simultaneously and directly impose the models non-linear parameter restrictions.

On the equivalence of solutions in rational expectations models

Abstract This paper shows the equivalence of solution indeterminancies discussed by Blanchard and by Taylor with a solution indeterminancy known as a bubble.

The "Saddlepoint Property" and the Structure of Dynamic Heterogeneous Capital Good Models

An earlier version of this paper was presented at the Second World Congress of the Econometric Society, Cambridge, England, September 8-14, 1970.

Unobserved Rational Expectations and the German Hyperinflation with Endogenous Money Supply

A Kalman filtering technique is employed to test the convergent expectation hypothesis in the great German hyperinflation when the money supply is endogenously determined. After converting the model structure to a state space form, the parameters are estimated via minimization of a Gaussian likelihood function. The result is then used in a filter- smoother combination to yield smoothed estimates of the state variable associated with the arbitrary constant of the rational expectations solution. Bo th para-metric and nonparametric tests lead us to reject the null hypothesis of convergent expectations. Copyright 1987 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Perfect Foresight, Expectational Consistency, and Macroeconomic Equilibrium

This paper begins by introducing three alternative properties of expectations: weak consistency, strong consistency, perfect foresight. These concepts are then used to consider the relationship between beginning-of-period (stock) equilibrium and end-of-period (flow) equilibrium for both discrete and continuous time. We show that in the former case the consistency between them requires not only that there be perfect foresight in predicting certain relevant variables but also that there be no accumulation of assets. In the latter case the relationship between the two equilibria rests on much weaker conditions. They are equivalent provided expectations satisfy our assumption of weak consistency.