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rational expectations hypothesis Syllabification: ra·tion·al ex·pec·ta·tions hy·poth·e·sis

Definition of rational expectations hypothesis in English:


The hypothesis that an economic agent will make full use of all available information when forming expectations, especially with regard to inflation, and not just past values of a particular variable. Compare with adaptive expectations hypothesis.
Example sentences
  • Pity about the rational expectations hypothesis, eh.
  • Rational expectations theory has emerged as an important aspect of new classical economics.
  • In the context of the bond market, empirical tests of the rational expectations hypothesis (REH) have without exception been tests of the time-series properties of interest rates.
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