Rational Expectations in Economic Theory

Denis Vîntu

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines the rational expectations hypothesis, a central concept in modern macroeconomics. It explores the theoretical foundations, methodological implications, applications in macroeconomic models, empirical evidence, criticisms, and relevance for contemporary policy analysis. The analysis highlights both the strengths and limitations of rational expectations, situating it as a benchmark assumption that continues to shape modern economic thought.

Keywords: Rational Expectations; New Classical School; Dynamic Stochastic General Equilibrium (DSGE); Inflation Targeting; Macroeconomic Policy; Monetary Policy Credibility; Forward-Looking Behavior; New Keynesian Phillips Curve; Microfoundations; Policy Ineffectiveness Proposition; Expectations Formation; Central Bank Policy; Price Stability; Policy Rules vs. Discretion; Economic Forecasting (search for similar items in EconPapers)
JEL-codes: C68 E12 E31 E32 E52 E58 (search for similar items in EconPapers)
Date: 2025-08, Revised 2025-08
New Economics Papers: this item is included in nep-dge and nep-hpe
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:125823

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