Near-rational inflation expectations challenge traditional economic models.
The study looked at how people's expectations about inflation affect the accuracy of economic forecasts. They found that when expectations are close to reality, there are still errors in predictions, especially depending on how the government manages money. The way people predict inflation doesn't fully support a specific economic theory, but it does align with a particular pricing model. Another commonly used model was shown to be incorrect, whether people's expectations were rational or close to reality.