ADAPTIVE AND RATIONAL EXPECTATIONS HYPOTHESIS IN BUSINESS FORECASTING: FUNDAMENTALS AND APPLICATIONS

Abstract

Purpose: to study the adaptive and rational expectations hypothesis, and its mathematical model. Discussion: the hypothesis of rational expectations,which is underlying the modern economic theory, is constantly subjected to criticism. Generally, this criticism is valid but no one knows what new assumptions can be replaced with this hypothesis and what can be expected from them. Everyone agrees that the expectations in the economy subject to both quantitative and qualitative changes. Such changes need to be predicted. Otherwise, it is impossible to assure the effective regulation of macroeconomic processes. Forecasts should be fairly accurate.Although, the possibility of such forecasts in terms of the theory of rational expectations is limited to the assumption of the uniqueness of equilibrium around which expectations form. That is why the question of saving of the adaptation principles in the theory of rational expectations is entitled to a discussion. Results: the author established the necessity of the sharing principle of adaptation and efficiency which has allowed formulating a hypothesis of adaptive-rational expectations. The mathematical description of the possible applications of this hypothesis with practical calculations is introduced in the article.