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Keywords:Rational expectations (Economic theory) 

Working Paper
Rational expectations and the dynamic adjustment of security analysts' forecasts to new information

FRB Atlanta Working Paper , Paper 93-9

Report
The existence of rational expectations equilibrium: a retrospective

This paper provides a selective review of theoretical research on the consistency of rational expectations equilibrium and its properties in microeconomic models. The general equilibrium framework is emphasized throughout the paper. After defining rational expectations equilibrium for a pure exchange economy, the paper presents a simple counterexample to illustrate that rational expectations equilibria need not exist. Results are summarized for the generic existence of fully revealing rational expectations equilibria in smooth economies satisfying additional dimensionality assumptions. Then ...
Staff Report , Paper 252

Working Paper
Around and around: the expectations hypothesis

We show how to construct arbitrage-free models of the term structure of interest rates in which various expectations hypotheses can hold. McCulloch (1993) provided a Gaussian non-Markovian example of the unbiased expectations hypothesis (U--EH), thereby contradicting the assertion by Cox, Ingersoll, and Ross (CIR, 1981) that only the so-called local expectations hypothesis could hold. We generalize that example in three ways: (i) We characterize the U--EH in terms of forward rates; (ii) we extend this characterization to a class of expectations hypotheses that includes all of those considered ...
Finance and Economics Discussion Series , Paper 96-17

Report
Great expectations and the end of the depression

This paper argues that the U.S. economy's recovery from the Great Depression was driven by a shift in expectations brought about by the policy actions of President Franklin Delano Roosevelt. On the monetary policy side, Roosevelt abolished the gold standard and-even more important-announced the policy objective of inflating the price level to pre-depression levels. On the fiscal policy side, Roosevelt expanded real and deficit spending. Together, these actions made his policy objective credible; they violated prevailing policy dogmas and introduced a policy regime change such as that ...
Staff Reports , Paper 234

Working Paper
Monetary policy under rational expectations with multiperiod wage stickiness and an economy-wide credit market

A reconsideration of the role of monetary policy in a multiperiod sticky-wage model that incorporates rational expectations and displays the natural rate property.
Working Papers (Old Series) , Paper 8716

Conference Paper
Are risk spreads rational?

Proceedings , Issue 7 , Pages 47-65

Working Paper
Federal reserve forecasts: asymmetry and state-dependence

We jointly test the rationality of the Federal Reserve?s Greenbook forecasts of infiation, unemployment, and output growth using a multivariate nonseparable asymmetric loss function. We find that the forecasts are rationalizable and exhibit directional asymmetry. The degree of asymmetry depends on the phase of the business cycle: The Greenbook forecasts of output growth are too pessimistic in recessions and too optimistic in expansions. The change in monetary policy that occured in the late 1970s has been attributed in the literature to the Fed coming to terms with the difficulties in ...
Working Papers , Paper 2013-012

Working Paper
Test of the rationality and accuracy of manufacturers' sales expectations

Working Paper Series / Economic Activity Section , Paper 8

Discussion Paper
Rational expectations and multiple equilibria: love, faith, money and underemployment

Special Studies Papers , Paper 106

Working Paper
Two practical algorithms for solving rational expectations models

This paper describes the E-Newton and E-QNewton algorithms for solving rational expectations (RE) models. Both algorithms treat a model's RE terms as exogenous variables whose values are iteratively updated until they (hopefully) satisfy the RE requirement. In E-Newton, the updates are based on Newton's method; E-QNewton uses an efficient form of Broyden's quasi-Newton method. The paper shows that the algorithms are reliable, fast enough for practical use on a mid-range PC, and simple enough that their implementation does not require highly specialized software. The evaluation of the ...
Finance and Economics Discussion Series , Paper 2011-44

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