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| Author: | Hommes, C. |
| Title: | On the consistency of backward-looking expectations: the case of the cobweb |
| Journal: | Journal of Economic Behavior and Organization
1998 : JAN 15, VOL. 33:3-4, p. 333-362 |
| Index terms: | ECONOMIC BEHAVIOUR EXPECTATIONS ORGANIZATION |
| Language: | eng |
| Abstract: | In dynamic models of economic fluctuations backward-looking expectations with systematic forecasting errors are inconsistent with rational behavior. In non-linear dynamic models exhibiting seemingly unpredictable, chaotic fluctuations, however, simple habitual "rule of thumb" backward-looking expectation rules may yield non-zero but nevertheless non-systemic forecasting errors. In a chaotic model expectational forecasting errors may have zero autocorrelations at all lags. |
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