Rational Expectations in an Econometric Model: Niesr Model 8∗

Abstract

This article summarises research on the role of forward-looking behaviour in important sectors of a macro-econometric model. It is based on the work of a number of researchers at the National Institute over the last two years. Important changes are introduced into many central equations in the model We argue that on grounds of both the underlying theory and the plausibility of the empirical results, this work is a significant advance in explaining dynamic macro-economic behaviour.