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Adaptive expectations

Updated: Aug 20, 2021

The principle that the future value of an economic variable is calculated using the previous prediction plus some fraction of the difference between the previous prediction and the outcome.

Adaptive expectations

Under adaptive expectations people leam from their experience, in a predictable way. For example, if the current inflation rate is higher than had been expected, people revise their expectations for the future inflation rate upwards.

Reference: Oxford Press Dictonary of Economics, 5th edt.

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James is a lead content editor for Invezz. He's an avid trader and golfer, who spends an inordinate amount of time watching Leicester City and the… read more.