Are Policy Variables Exogenous?: The Econometric Implications of Learning while Maximizing

1. 1 Motivation and Definition of Topic To provide motivation and to help define the topic of this study, important links between specific areas of economic theory are first highlighted. (i) Learning and Rational Expectations Theory In a standard rational expectations setting, agents in equilibrium have all the information about the model that enables them to correctly forecast future payoff—relevant variables. What rational expectations theory in its standard form does not tell us is what ...