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.

Sources & references
Risk disclaimer
James Knight
Editor of Education
James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.