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Rational Expectations

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The New Palgrave Dictionary of Economics

Abstract

Rational expectations is an equilibrium concept that attributes a common model (a joint probability distribution over exogenous variables and outcomes) to nature and to all agents in the model. The rational expectations equilibrium concept makes parameters describing agents’ belief disappear as components of a model, giving rise to the cross-equation restrictions that offer rational expectations models their empirical power.

This chapter was originally published in The New Palgrave Dictionary of Economics, 2nd edition, 2008. Edited by Steven N. Durlauf and Lawrence E. Blume

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  1. http://link.springer.com/referencework/10.1057/978-1-349-95121-5

    Thomas J. Sargent

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  1. Thomas J. Sargent
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    Sargent, T.J. (2008). Rational Expectations. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95121-5_1684-2

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    • DOI: https://doi.org/10.1057/978-1-349-95121-5_1684-2

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    • Publisher Name: Palgrave Macmillan, London

    • Online ISBN: 978-1-349-95121-5

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    Chapter history

    1. Latest

      Rational Expectations
      Published:
      06 March 2017

      DOI: https://doi.org/10.1057/978-1-349-95121-5_1684-2

    2. Original

      Rational Expectations
      Published:
      27 November 2016

      DOI: https://doi.org/10.1057/978-1-349-95121-5_1684-1

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