EXPECTATIONS, LEARNING AND EMPIRICAL MACROECONOMIC MODELS

The developments in the treatment of expectations in empirical macroeconomic models that have taken place over the last 30 years are surveyed. The main concern is to focus on the implications of expectation effects in the practical use of models, i.e. in forecasting and policy analysis, rather than to consider either the theoretical literature or the literature on econometric estimation and identification, both of which are already well surveyed. The general development in expectations models is discussed first. Then the literature on linear models is considered and the development of expectations effects to large nonlinear econometric models is examined.