Assessing Rational Expectations – Sunspot Multiplicity & Economic Fluctuations: Sunspot Multiplicity and Economic Fluctuations - Hardcover

Guesnerie, Roger

Hardcover

ISBN 10: 0262072076 ISBN 13: 9780262072076

Publisher: MIT Press, 2001

Synopsis

In this book Roger Guesnerie contributes to the critical assessment of the Rational Expectations hypothesis (REH). He focuses on the multiplicity question that arises in (infinite horizon) Rational Expectation models and considers the implications for a theory of endogenous fluctuations. The REH, which dominates the economic modeling of expectations in most fields of formalized economic theory, is often associated with an optimistic view of the working of the markets--a view that Guesnerie scrutinizes closely.The book is divided into four parts. The first part uses the framework of simple models to characterize the stochastic processes that trigger self-fulfilling prophecies and examines the connections between periodic equilibria (cycles) and stochastic equilibria (sunspots). (A sunspot is a random shock uncorrelated with underlying economic fundamentals.) The second part views sunspot equilibria as overreactions triggered by small variations of intrinsic variables--rather than as fluctuations with no trigger--and looks at the consequences for a monetary theory à la Lucas. The third part develops the basic theory to encompass more complex, multidimensional systems. It focuses in particular on the special class of equilibria generating small fluctuations around a steady state. Broadening the scope, the fourth part looks at the stability of cycles, sunspots in systems with memory, and current research on rational expectations.

About this title

About the Author

Roger Guesnerie is Professor at the College de France and President of the Paris School of Economics. He is the author of Assessing Rational Expectations and Assessing Rational Expectations 2 (MIT Press, 2001, 2005).

Edition details

• Publisher: MIT Press
• Publication date: 2001
• Language: English
• ISBN 10: 0262072076
• ISBN 13: 9780262072076
• Binding: Hardcover
• Number of pages: 292