"Without capital markets extending infinitely far into the future, the economy will not necessarily converge to the long run equilibrium. There are paths which are dynamically consistent with rational expectations in the short run. While herding behavior is often attributed to investor myopia, these results suggest that bubbles may arise so long as investors do not look infinitely far into the future. However, even when investors look infinitely far into the future, it may not be possible for them to predict (on the basis of rational expectations alone) how the economy will evolve, if, for instance, there are multiple paths consistent with rational expectations."
Quote Details
Added by wikiquote-import-bot
Unverified quote
0 likes
Original Language: English
Available Languages (1)
Sources
José Antonio Ocampo, Shari Spiegel, and Joseph E. Stiglitz, "Capital Market Liberalization and Development" in Capital Market Liberalization and Development.
https://en.wikiquote.org/wiki/Rational_expectations
Revision History
No revisions have been submitted for this quote.
Categories
Rational expectations
37 quotes on TrueQuotesView all quotes by Rational expectations →
Related Quotes
"Using the popular macroeconomic models of the time, Lucas and Sargent showed how replacing traditional assumptions ab…"
"So monetary policy decisions tend to regress toward the mean and to be inertial—and hence biased in just the same way…"
"Most mainstream macroeconomic theoretical innovations since the 1970s (the New Classical rational expectations revolu…"
"Its development of Mises’s theory of action anticipated much of the rational expectations idea that would later win R…"
"The current macroeconometrics literature has proposed two ways to confront general equilibrium rational expectations …"
"The reason is that the second order properties induced by similar general equilibrium models are, in general, so diff…"
"The Keynesian econometric methodology developed by Klein and associates was criticized by Lucas in his 1976 “Critique…"
"The rational expectations revolution of the 1970s threw out the textbook Keynesian apparatus because it did not cope …"
"In the early 1970s,... economists began to embrace the Rational Expectations Hypothesis (REH), according to which mar…"
"One troublesome aspect is the place of rational expectations macroeconomics in the often political debate over Keynes…"