Abstract
In recent years many authors have proposed models of economic behaviour in which certain current endogenous variables react to rational (mathematical) expectations of future endogenous variables. Almost always the reasoning behind that specification is heuristic and the specified model correspondingly ad hoc. The purpose of this paper is to present a theoretical rationale for these expectations terms which is based on rational behaviour on the part of decision makers. We then look at some empirical consequences of such a specification in a typical macroeconometric model.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
Similar content being viewed by others
References
Aubin, J.P. (1979), ‘Mathematical Methods of Game and Economic Theory’, North Holland, Amsterdam.
Batchelor, R.A. and T.D. Sheriff (1980), ‘Unemployment and Unanticipated Inflation in Postwar Britain’, Economica, 47, pp. 179–192.
Bestek ’81 (1978), ‘The Main Features of Medium Term Financial, Social and Economic Policy’, Government Printing Office, The Hague (in Dutch).
Bomhoff, E.J. (1980), ‘Inflation, the Quantity Theory, and Rational Expectations’, North Holland, Amsterdam.
Brandsma, A.S. and A.J. Hughes Hallett (1982), The Impact of Noncausality on Noncooperative Strategies for Dynamic Games’, Economic Letters, 10, pp. 9–15.
Brandsma, A.S. and N. Van der Windt (1983), ‘Wage Bargaining and the Phillips curve: A Macroeconomic View’, Applied Economics, 15, pp. 61–71.
Brandsma, A.S., A.J. Hughes Hallett and N. Van der Windt (1983), ‘Optimal Control of Large Nonlinear Models: An Effficient Method of Policy Search Applied to the Dutch Economy’, Journal of Policy Modelling (forthcoming).
Brandsma, A.S., A.J. Hughes Hallett and N. Van der Windt (1984), ‘Optimal Economic Policies and Uncertainty: the Case against Policy Selection by Nonlinear Programming’, Computers and Operations Research (forthcoming).
Central Planning Bureau (1977), ‘A Macro-model for the Dutch Economy in the Medium Term (Vintaf II)’, Occasional Paper No. 12, The Hague (in Dutch).
Chow, G.C. (1975), Analysis and Control of Dynamic Economic Systems, John Wiley & Sons, New York.
DenHartog, H. and H.S. Tjan (1976), ‘Investment, Wages, Prices and the Demand for Labour: a Clay-Clay Vintage Model for the Netherlands’, De Economist, 124, pp. 32–55.
Friedman, J.W. (1977), Oligopoly and the Theory of Games, North Holland, Amsterdam.
Gilbert, C.L., A.J. Hughes Hallett, and S. Ghosh (1984), The Econometrics of Stabilising Speculative Commodity Markets, Oxford University Press, Oxford (forthcoming).
Hicks, J.R. (1975), ‘What’s wrong with Monetarism’, Lloyds Bank Review, 118, pp. 1–13.
Hughes Hallett, A.J. (1983), ‘Optimal Strategies for Dynamic Games and the Incentive to Cooperate’, In ternational Journal of System Science, 14, pp. 179–200.
Hughes Hallett, A.J. and H.J.B. Rees (1983), Quantitative Economic Policies and Interactive Planning, Cambridge University Press, Cambridge and New York.
Kendrick, D.A. (1981), Stochastic Control for Economic Models, McGraw-Hill, New York.
Knegt, L., A. Knoester, R.S.G. Lenderink and N. Van der Windt (1978), ‘Macro-economic policy and Vintaf-II: a sensitivity analysis’, in W. Driehuis and A. van der Zwan (eds.), A critical review of economic policy making, Stenfert Kroese, Leyden/Antwerp (in Dutch).
Knoester, A. and J. van Sinderen (1983), ‘Economic Policy and Employment’, in A. Maddison and B.S. Wilpstra (eds), Unemployment: a Dutch Perspective, Ministry of Social Affairs and Employment, The Hague.
Kydland, F.E. and E.C. Prescott (1977), ‘Rules rather than Discretion: the Inconsistency of Optimal Plans’, Journal of Political Economy, 85, pp. 472–479.
Lucas, R.E. (1976), ‘Econometric Policy Evaluation: a critique’, in K. Brunner and A.H. Meltzer (eds.), The Phillips Curve and Labour Markets, Carnegie-Rochester series on Public Theory, North-Holland, Amsterdam.
Minford, P. and D.A. Peel (1982), ‘The Microfoundations of the Phillips Curve with Rational Expectations’, Oxford Economic Papers, 34, pp. 449–451.
Sargent, T.J. and N. Wallace (1975), ‘Rational Expectations, the Optimal Monetary Instrument, and the Optimal Money Supply Rule’, Journal of Political Economy, 83, pp. 241–254.
Theil, H. (1964), Optimal Decision Rules for Government and Industry, North Holland, Amsterdam.
Author information
Authors and Affiliations
Editor information
Rights and permissions
Copyright information
© 1984 Martinus Nijhoff Publishers, The Hague
About this chapter
Cite this chapter
Brandsma, A.S., Hallett, A.J.H. (1984). The Structure of Rational Expectations Behaviour in Economics: An Empirical View. In: Ancot, J.P. (eds) Analysing the Structure of Econometric Models. Advanced Studies in Theoretical and Applied Econometrics, vol 2. Springer, Dordrecht. https://doi.org/10.1007/978-94-009-6098-5_8
Download citation
DOI: https://doi.org/10.1007/978-94-009-6098-5_8
Publisher Name: Springer, Dordrecht
Print ISBN: 978-94-009-6100-5
Online ISBN: 978-94-009-6098-5
eBook Packages: Springer Book Archive