Skip to main content Accessibility help
×
Hostname: page-component-586b7cd67f-tf8b9 Total loading time: 0 Render date: 2024-11-25T06:30:26.981Z Has data issue: false hasContentIssue false

Chapter 12 - Expectations

Published online by Cambridge University Press:  30 January 2010

Christian Gourieroux
Affiliation:
CREST-INSEE, Paris
Alain Monfort
Affiliation:
CREST-INSEE, Paris
Get access

Summary

Most of the models and results described in the previous chapters are based on the notion of an optimal forecast of a variable given its past. For example, this notion has been useful to define the autoregressive form of a process, its innovation, and so on, but also to analyze in greater details the links between processes (partial correlation, causality measurement, etc.) or to develop estimation methods (maximum likelihood in conditional form).

In this chapter we are interested in a more practical aspect of this optimal forecast.

Economic agents, e.g., firms, financial operators, consumers, must in general decide their current behavior taking into consideration the ideas they have about the future. Since this future is partially unknown, they have to forecast it in a proper way. This leads us to study two questions which are linked to each other:

  1. (i) How do agents foresee their future?

  2. (ii) How do their expectations influence their current behavior?

In the first section we will start by recalling a number of results on forecasts which have been introduced in the previous chapters. We will treat the updating problem in great detail and specify the economic terminology which is slightly different from the probabilistic terminology used up to now.

The other sections are all related to the analysis of explanatory models containing expectations among the explanatory variables. More precisely, we will look at the properties of these models in the case of optimal expectations (or rational in the economic terminology).

Type
Chapter
Information
Publisher: Cambridge University Press
Print publication year: 1996

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Save book to Kindle

To save this book to your Kindle, first ensure [email protected] is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×