. © 1999-2003
Douglas A. Ruby



Adaptive Expectations Model
The Adaptive Expectations Model
The Adaptive Expectations model is based a weighted average of past actual 'pt' and past expected inflation 'E[pt-1]':

E[pt] = qpt-1 + (1-q)E[pt-1] where 0 < q < 1
or
E[pt] = E[pt-1] + q{pt-1 - E[pt-1]}

For a brief simulation enter (or adjust) the following values:
Enter the Initial Rate of Inflation (0 < Inflation < 0.30):
Enter an inflationary shock (-0.10 < Shock < 0.10):
Enter the rate of Acceleration (-0.02 < rate < +0.02):
Enter the value of theta (0 < theta < 1):