noun

• 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.’

  More example sentences

  • ‘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.’