Rational expectations theory argues that economic agents (individuals, businesses, investors) effectively use all available information when making decisions about the future.
Key principles: Use of best available information (considering all relevant data, past experience, and current policies), absence of systematic errors (predictions are correct on average), and policy neutrality (anticipated policy changes are already reflected in market behavior).
This contrasts with adaptive expectations, where people rely solely on past data.
In Bangladesh, while theoretically relevant, information asymmetry and market inefficiencies limit the practical application of this theory.