Analysis of economic expectation models within framework of nonlinear threshold regression models

The concept of Expectations is one of the important developments in the last 50 years in Economic Theory. On the other hand, popularity of nonlinear modeling techniques which are used in econometric studies has been increasing. In this study, Adaptive and Rational Expectation theories are analyzed within frame of linear and nonlinear Threshold Regression Models and parameter estimation biases are provided with Monte Carlo simulation technique. According to analysis results, while Adaptive Expectations model offers biased parameter estimation values with both linear and nonlinear models, Rational Expectation model offers unbiased parameter estimation values. Key Words 1. Adaptive Expectations 2. Rational Expectations 3. Nonlinear Econometric Models 4. Threshold Regression Models 5. Econometric Simulation