Expectations Theory

These notes were developed for the first year graduate macroeconomics class at UGSM-Monarch Business School and the Universidad Azteca. Expectations theory has either been neglected or debated on a highly technical level beyond the reach of most university students. These notes thus fill, a major gap, providing an essential and invaluable guide to this exciting field of economic theory. “Rational expectations…is an offshoot of Chicago-monetarism…the radical wing of monetarism. It is best known for the startling policy conclusions…to wit, that macroeconomic policies, both monetary and fiscal are ineffective, even in the short run…it is the extreme antithesis of orthodox Keynesianism …it contradicts…the Austrian Theory of money and the business cycle (of Hayek and Mises) which asserts a basic unneutrality of money and it goes beyond Friedman’s monetarism which…does not exclude quick though transitory effects on output and employment…” (Gottfried Haberler)