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.
- 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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Syllabification: ra·tion·al ex·pec·ta·tions hy·poth·e·sis
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