Michigan Academician, January 1st, 2008
Are Residual Economic Relationships Normally Distributed? Testing an Assumption of Neoclassical Economics. Thomas Bundt, Robert P. Murphy, Hillsdale College, Department of Economics and Business Administration, Hillsdale, MI 49242
Neoclassical economics typically assumes that the deviation of an economic variable from its expected value, i.e. "disturbances," follows a normal distribution. This implies that moment generating integrals are bounded. The main justification for this assumption is the Central Limit Theorem, which argues the distribution of a sum is asymptotically normal since eco...
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