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Rational expectation and money supply neutrality in countries in transition on example of Croatia

This paper tests the basic assumptions of the 'new classical economics' in transitional environment on the example of Croatia. One of the fundamental theses of this school is that expectations are rational, which in modelling means that economic subjects determine the future value of variables as if they knew the economic model determining the variable and while doing so use the available information in the best possible way. It is also assumed that the real trends in economy are affected only by unexpected measures of economic policy, while the predictable measures are neutral. As the rational expectation is increasingly present in economic theory, the hypothesis of transitional influence on rationality and neutrality will be tested on the example of the Croatian economy.

new classical economics; rational expectation; money supply neutrality

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