Ignorance may be optimal? Some welfare implications of rational versus non-rational expectations
The utility of agents in both stationary non-rational expectations equilibrium and stationary rational expectations equilibrium were examined in an overlapping generations model. Rational expectations models assume that utility will be enhanced if information is used efficiently and expectations are not biased. It was suggested that when government expenditures are sourced from a distortionary tax, non-rational expectations equilibrium is Pareto superior to rational expectations but not Pareto optimal.
Publication Name: Journal of Macroeconomics
When Wall Street conflicts with main street - the divergent movements of Taiwan's leading indicators
A study suggesting that using all the leading economic indicators simultaneously for forecasting nullifies the impact of some of them, which could adversely affect the accuracy of forecasts. To overcome these problems, the indicators should be split into real and financial sectors. For the purpose of the study, Taiwan's business cycle indicators are examined. The reasons for differences in Wall Street trends and forecasts are also examined.
Publication Name: International Journal of Forecasting
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