This paper investigates the issue of rational expectations using inflation forecasts from the Survey of Professional Forecasters (SPF) and the Green Book. We provide an alternative test of rational expectations hypothesis by measuring the degree of persistence of potential systematic mistakes....

Canonical analysis of the classical general equilibrium model demonstrates the existence of an open and dense subset of standard economies that possess fully-revealing rational expectations equilibria. This paper shows that the analogous result is not true in urban economies under appropriate...

Canonical analysis of the classical general equilibrium model demonstrates the existence of an open and dense subset of standard economies that possess fully-revealing rational expectations equilibria. This paper shows that the analogous result is not true in urban economies under reasonable...

Using a multi-country general equilibrium model, we demonstrate that when agents face credit constraints in an international financial market, rational expectations, which are ex-post heterogeneous between countries, cause business fluctuations. If the international financial market becomes...

The Rational Expectations Hypothesis (REH) states that the actual outcome will be identical to the optimal forecast when all obtainable information had been utilized in forming the expectations. This study intends to empirically examine the existence of rational behavior in the banks and other...

We obtain a closed-form solution to rational expectations equilibrium with transaction costs in the framework of Grossman and Stiglitz (1980) [On the impossibility of informationally efficient markets. American Economic Review 70, 543-566]. Individual private information incorporated into prices...

The purpose of this paper is twofold: first, to discuss the theoretical foundations and policy implications of two of the offshoots of modern macroeconomics viz., supply-side economics and rational expectations; and second to evaluate the recent development of thinking in macroeconomics. Thereby...

According to the theory of efficient markets, economic agents use all available information to form rational expectations. Fiscal marksmanship, the accuracy of budgetary forecasting, can be one important piece of such information the rational agents must consider in forming expectations. Using...