On The (In)Consistency of Re Modeling

Daniel Heymann and Paulo Daniel Pascuini ()
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Paulo Daniel Pascuini: Instituto Interdisciplinario de Economía Política de Buenos Aires - UBA - CONICET

No 2018-28, Documentos de trabajo del Instituto Interdisciplinario de Economía Política IIEP (UBA-CONICET) from Universidad de Buenos Aires, Facultad de Ciencias Económicas, Instituto Interdisciplinario de Economía Política IIEP (UBA-CONICET)

Abstract: Rational Expectations (RE) is typically interpreted as: (i) an equivalence between the probability distribution of future outcomes informing agents´ decisions and the objective distributions; or: (ii) a correspondence between the expectations of agents and those generated by professionally validated models. Both definitions differ, unless absolute validity is counterfactually attributed fallible models built by economists. Another ambiguity arises with the model-consistency notion, since what is considered relevant theory has varied over time and across researchers, especially in Macroeconomics. These issues affect the logic and significance of analytical procedures for treating expectations, and seem particularly pertinent when studying crises.

Keywords: Macroeconomics; Rational Expectations; Model Consistency (search for similar items in EconPapers)
JEL-codes: B41 D83 D84 E00 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2018-05
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Persistent link: https://EconPapers.repec.org/RePEc:ake:iiepdt:201828

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