Rational Expectations

This insightful book explores the concept of rational expectations and its relevance in contemporary economic analysis, emphasizing its applications and ongoing debates.

The concept of rational expectations has gained significant traction in economic theory, and Rational Expectations serves as a comprehensive exploration of this idea. The author, Professor Sheffrin, delves into the logical underpinnings of rational expectations, illustrating how individuals form expectations about key economic variables in a manner that aligns with actual economic conditions. This foundational understanding is crucial for analyzing various economic scenarios and policies.

In the subsequent chapters of Rational Expectations, Sheffrin examines the application of this concept across different fields of economics, including macroeconomics, financial markets, and microeconomics. By presenting real-world examples and empirical evidence, the book highlights how rational expectations inform economic models and influence policy decisions. The discussions are accessible, making the material suitable for both beginning graduate students and those without a specialized background in economics.

The second edition of Rational Expectations includes significant revisions and expansions, incorporating recent developments in the field. New sections cover topics such as learning processes, the rationality of reported expectations, and various tests of the Lucas critique. The final chapter reflects on the ongoing debates surrounding rational expectations in macroeconomic policy, emphasizing that while the concept remains central, the development of fully functional models is still a work in progress. This book is an essential resource for anyone interested in understanding the complexities of economic expectations.