Abstract
Abstract In this paper we present a consistent standard normal model specification test for ARMAX models. The null hypothesis is that the ARMAX model represents the conditional expectation of the dependent variable relative to the entire past of the economic vector time series process under review. This null is tested against the general alternative hypothesis that the null is false. The test is applied to testing the rational expectations-natural rate (RE-NR) hypothesis for the Netherlands according to the approach of Sargent (1976). It appears that RE-NR hypothesis has to be rejected.
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