Rational expectations

Economists have recently been working with models in which individuals form expectations of key variables in a "rational" manner, such that these expectations are consistent with actual economic environments. Professor Sheffrin first explores the logical foundation of the concept and the case for employing it in economic analysis. Subsequent chapters investigate its use in macroeconomics, financial markets, and microeconomics. A final chapter assesses its impact on theoretical and empirical work in economics and policy arenas. The author argues that although expectations are still central to…