Definition of rational expectations hypothesis in US English:

rational expectations hypothesis


  • The hypothesis that an economic agent will make full use of all available information when forming expectations, especially with regard to inflation, and not just past values of a particular variable.

    • ‘Rational expectations theory has emerged as an important aspect of new classical economics.’
    • ‘Pity about the rational expectations hypothesis, eh.’
    • ‘In the context of the bond market, empirical tests of the rational expectations hypothesis (REH) have without exception been tests of the time-series properties of interest rates.’