ERRORS IN RATIONAL-EXPECTATIONS MATTER

Authors
BORGHANS L
Citation
L. Borghans, ERRORS IN RATIONAL-EXPECTATIONS MATTER, Economics letters, 41(1), 1993, pp. 25-28
Citations number
9
Categorie Soggetti
Economics
Journal title
Economics letters → ACNP
ISSN journal
01651765
Volume
41
Issue
1
Year of publication
1993
Pages
25 - 28
Database
ISI
SICI code
0165-1765(1993)41:1<25:EIRM>2.0.ZU;2-V
Abstract
Muth (Econometrica, 1961, 29, 299-306) and Sargent and Wallace (Journa l of Monetary Economics, 1976, 2, 169-183) claimed that the main resul ts of rational expectations theory allow for possibly large independen t errors. This paper shows that in such a situation the pseudo rationa l expectation is no longer optimal.