Usefulness of Adaptive and Rational Expectations in Economics
AbstractThis paper provides a statistical reason and strong econometric evidence for supporting the adaptive expectations hypothesis in economics. It points out why the rational expectations hypothesis was embraced by the economics profession without sufficient evidence. Finally it will summarize the conditions under which these two competing hypotheses can be used effectively.
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Bibliographic InfoPaper provided by Princeton University, Department of Economics, Center for Economic Policy Studies. in its series Working Papers with number 1334.
Date of creation: Sep 2011
Date of revision:
macroeconomics; adaptive expectations; rational expectations;
Find related papers by JEL classification:
- E00 - Macroeconomics and Monetary Economics - - General - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-15 (All new papers)
- NEP-CBA-2011-10-15 (Central Banking)
- NEP-CBE-2011-10-15 (Cognitive & Behavioural Economics)
- NEP-MAC-2011-10-15 (Macroeconomics)
- NEP-UPT-2011-10-15 (Utility Models & Prospect Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Chow, G.C., 1988.
"Rational Versus Adaptive Expectations In Present Value Models,"
328, Princeton, Department of Economics - Econometric Research Program.
- Chow, Gregory C, 1989. "Rational versus Adaptive Expectations in Present Value Models," The Review of Economics and Statistics, MIT Press, vol. 71(3), pages 376-84, August.
- Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
- Chow, Gregory C., 1997. "Dynamic Economics: Optimization by the Lagrange Method," OUP Catalogue, Oxford University Press, number 9780195101928, September.
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