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Honoring Marvin Goodfriend

May 2022

The Implications of Optimal Prediction Formulae

Goodfriend, M. 1982. An Alternate Method of Estimating the Cagan Money Demand Function in Hyperinflation Under Rational Expectations. Journal of Monetary Economics 9, no. 1: 43-57. 


Marvin Goodfriend was not an econometrician, but he was a quantitative economist. He based his policy advice on the logic and quantitative implications of economic models. Like many economists who came of age in the late 1970s and early 1980s, Marvin learned how models were affected by the assumption of rational expectations. He also realized that the optimal prediction formulae used to compute rational expectations had implications for econometric practice, and he used these implications in his empirical research. Three of Marvin's papers include particularly novel applications of these insights. I'll discuss these and then conclude with some brief comments about Marvin and the research environment at the Federal Reserve Bank of Richmond.

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Cite as: Watson, Mark W. 2022. "The Implications of Optimal Prediction Formulae." In Essays in Honor of Marvin Goodfriend: Economist and Central Banker, edited by Robert G. King and Alexander L. Wolman. Richmond, Va.: Federal Reserve Bank of Richmond.

 
1

Cagan (1956).

2

Goodfriend (1982).

3

E.g., Hansen (1982) and Hayashi and Sims (1983).

4

For example, see Goldfeld (1973).

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