The Development of Expectations Generating Schemes Which Are Asymptotically Rational

Kerry David Patterson

Scottish Journal of Political Economy, 1987, vol. 34, issue 1, 1-18

Abstract: As an alternative to the hypothesis of fully rational expectations, this study develops the concept of asymptotically rational expectations, and applies it in the problem of model design. Easily applied conditions are derived to ensure asymptotic rationality and several models are developed which satisfy these conditions. The connections are shown between developments of the adaptive expectations hypothesis and, interalia, error-correction mechanisms. The ideas are illustrated with the Livingston price-expectations data. Copyright 1987 by Scottish Economic Society.

Date: 1987
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