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Modelling Expectations Formation with Measurement Errors

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  • Galbraith, John W

Abstract

This paper provides a model of expectations formation with a relatively general linear structure from which various standard models emerge as special cases. By concentrating on agents' information acquisition rather than on their parameter estimation, the author obtains a rational forecasting model which is consistent with a wider variety of responses to new information than are most commonly-used hypotheses. After describing the structure of the model, several potential extensions and the conditions under which standard hypotheses emerge, he considers testable restrictions on the general model which lead to some simplification while continuing to allow more general responses of expectations to information. Copyright 1988 by Royal Economic Society.

Suggested Citation

  • Galbraith, John W, 1988. "Modelling Expectations Formation with Measurement Errors," Economic Journal, Royal Economic Society, vol. 98(391), pages 412-428, June.
    • Handle: RePEc:ecj:econjl:v:98:y:1988:i:391:p:412-28
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    Cited by:

    1. Silva Lopes, Artur, 1994. "A "hipótese das expectativas racionais": teoria e realidade (uma visita guiada à literatura até 1992) [The "rational expectations hypothesis": theory and reality (a guided tour ," MPRA Paper 9699, University Library of Munich, Germany, revised 23 Jul 2008.
    2. Demery, David & Duck, Nigel W., 2007. "The theory of rational expectations and the interpretation of macroeconomic data," Journal of Macroeconomics, Elsevier, vol. 29(1), pages 1-18, March.
    3. David Demery & Nigel Duck, 2003. "Inflation Dynamics and Inflation Regimes," Bristol Economics Discussion Papers 03/549, School of Economics, University of Bristol, UK.
    4. David Demery & Nigel Duck, 2002. "Optimally Rational Expectations and Macroeconomics," Bristol Economics Discussion Papers 02/533, School of Economics, University of Bristol, UK.

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