context one could think of stochastic events such as fluctuation in the climate, natural disasters, shocks to

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context one could think of stochastic events such as fluctuation in the climate, natural disasters, shocks to world trade (German reunification, OPEC shocks, the Gulf War), etc. In such a setting, forecasting is a lot more difficult. Muth

(1961) formulated the hypothesis of rational expectations (REH) to deal with situations

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