The efficient market hypothesis and rational expectations macroeconomics. How did they meet and live (happily) ever after?

Thomas Delcey and Francesco Sergi ()
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Thomas Delcey: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique
Francesco Sergi: UWE Bristol - University of the West of England [Bristol]

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Abstract: This article contributes to the study of the historical relationship between macroeconomics and financial economics. We investigate the interactions, in the 1960s and 1970s, between two research programmes—"rational expectations macroeconomics" (or "new classical macroeconomics") and the efficient market hypothesis. We uncover the back-and-forth-dialogue between these two research programmes, which took place along the 1970s. We identify Sargent's contribution on the term structure of interest rates (and ensuing debates) as the starting point of this dialogue. We then highlight how rational expectations models reshaped the definition and assessment of the efficient market hypothesis in financial economics.

Keywords: Term structure; macroeconomics and financial economics; Fama (Eugene); Lucas (Robert E.); Sargent (Thomas J.) (search for similar items in EconPapers)
Date: 2022
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Published in European Journal of the History of Economic Thought, inPress, pp.1-31. ⟨10.1080/09672567.2022.2108869⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03774313

DOI: 10.1080/09672567.2022.2108869

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