[{"data":1,"prerenderedAt":58},["ShallowReactive",2],{"term:rational-expectations":3},{"term":4,"related":45},{"id":5,"title":6,"body":7,"category":27,"description":28,"extension":29,"faq":30,"meta":31,"navigation":32,"path":33,"related":34,"seo":38,"stem":39,"takeaways":40,"__hash__":44},"terms\u002Fterms\u002Frational-expectations.md","Rational Expectations",{"type":8,"value":9,"toc":22},"minimark",[10,15,19],[11,12,14],"h2",{"id":13},"understanding-rational-expectations","Understanding Rational Expectations",[16,17,18],"p",{},"Developed by John Muth and brought into macroeconomics by Robert Lucas and others in the 1970s, rational expectations means people cannot be fooled repeatedly by predictable policy.",[16,20,21],{},"It explains why credible central bank commitments matter so much, and it is built into most modern macroeconomic models, including those in Romer's Advanced Macroeconomics.",{"title":23,"searchDepth":24,"depth":24,"links":25},"",2,[26],{"id":13,"depth":24,"text":14},"economy","The assumption that people use all available information to forecast the future without systematic errors.","md",[],{},true,"\u002Fterms\u002Frational-expectations",[35,36,37],"phillips-curve","central-bank-independence","inflation-targeting",{"title":6,"description":28},"terms\u002Frational-expectations",[41,42,43],"People forecast using all available information.","Predictable policies have less effect because people anticipate them.","Credibility and expectations are central to modern macro.","2UwKl5plrKgj00OmAJguVbYtly_ymJI_jFly7MZo5ag",[46,50,54],{"title":47,"description":48,"path":49},"Central Bank Independence","Insulating a central bank from short-term political pressure in setting monetary policy.","\u002Fterms\u002Fcentral-bank-independence",{"title":51,"description":52,"path":53},"Inflation Targeting","A monetary policy framework built around a publicly announced inflation target.","\u002Fterms\u002Finflation-targeting",{"title":55,"description":56,"path":57},"Phillips Curve","The short-run trade-off between unemployment and inflation.","\u002Fterms\u002Fphillips-curve",1793374005770]