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RATIONAL EXPECTATIONS IN THE AGGREGATE
Author(s) -
Haltiwanger JOHN C.,
Waldman MICHAEL
Publication year - 1989
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1989.tb00793.x
Subject(s) - rational expectations , economics , argument (complex analysis) , aggregate (composite) , yield (engineering) , econometrics , positive economics , mathematical economics , biochemistry , chemistry , materials science , composite material , metallurgy
This paper investigates the relationship between the way rational expectations is employed in practice and the argument initially put forth to justify its use. In practice rational expectations has meant that the expectations of each agent taken separately is consistent with the predictions of the theory. This is different than the argument frequently used by proponents of rational expectations that on an aggregate level expectations should be consistent with the theory. The primary findings are that standard and aggregate rational expectations typically yield systematically different equilibria and that the size of the difference depends positively on the degree of synergism.