Aggregation Over Time and the Inverse Optimal Predictor Problem for Adaptive Expectations in Continuous Time

February 1983 | Article

Aggregation Over Time and the Inverse Optimal Predictor Problem for Adaptive Expectations in Continuous Time

Lars Peter Hansen and Thomas J. Sargent

This paper describes the continuous time stochastic process for money and inflation under which Cagan’s adaptive expectations model is optimal. It then analyzes how data formed by sampling money and prices at discrete points in time would behave.

@article{hansen1983aggregation,

title={Aggregation over time and the inverse optimal predictor problem for adaptive expectations in continuous time},

author={Hansen, Lars Peter and Sargent, Thomas J},

journal={International Economic Review},

pages={1–20},

year={1983},

publisher={JSTOR}

}