Rational Expectations Models in Macroeconomics

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This paper is a review of rational expectations models used in macroeconomic research. The purpose is to examine in some detail the differences between the models, the advantages and disadvantages of alternative models the empirical support for the models and their policy implications. The main theme is that there os a wide diversity among rational expectations models in macroeconomics, despite their common expectational assumptions and methods of analysis. Information-based and contast-based theories are reviewed as alternative models of aggregate supply. A brief review od rational expectations models of the demand side is also provided, along with a discusion of some problems with the rational expextations assumption.

Published:

• Taylor, John B. "Rational Expectations Models in Macroeconomics," Frontiers of Economics, ed. by Kenneth J. Arrow and Seppo Houkupohju, Basil Blackwell Publishers, (1985), pp. 391-425. ,
• Taylor, John B. "Rational Expectations Models in Macroeconomics," Frontiers of Economics, edited by Kenneth J. Arrow and Seppo Honkapohja, pp. 391-42 5. Oxford: Basil Blackwell Ltd. 1985.

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