Assessing Rational Expectations
"Eductive" Stability in Economics

A theoretical assessment of the Rational Expectations Hypothesis through subjecting a collection of economic models to an "eductive stability" test.

He then explores to what extent general equilibrium strategic complementarities interfere with partial equilibrium considerations in the formation of stable expectations. Guesnerie next examines two issues relating to eductive stability in financial market models, speculation and asymmetric price information. The dynamic settings of an infinite horizon model are then taken up, and particular standard and generalized saddle-path solutions are scrutinized. Guesnerie concludes with a review of general questions and some "cautious" remarks on the policy implications of his analysis.