When are adaptive expectations rational? A generalization

Ben Shepherd

MPRA Paper from University Library of Munich, Germany

Abstract: This note presents a simple generalization of the adaptive expectations mechanism in which the learning parameter is time variant. It is shown that expectations generated in this way are rational in the sense of producing minimum mean squared forecast errors for a broad class of time series models, namely any process that can be written in linear state space form.

Keywords: Adaptive Expectations; Rational Expectations; Kalman Filter (search for similar items in EconPapers)
JEL-codes: C22 C53 (search for similar items in EconPapers)
Date: 2011-10-25
New Economics Papers: this item is included in nep-cba, nep-evo, nep-for and nep-ore
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Related works:
Journal Article: When are adaptive expectations rational? A generalization (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:34644

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