An eigenvalue method of undetermined coefficients for solving linear rational expectations models

✍ Scribed by Peter A. Zadrozny

• Publisher: Elsevier Science
• Year: 1998
• Tongue: English
• Weight: 189 KB
• Volume: 22
• Category: Article
• ISSN: 0165-1889
• DOI: 10.1016/s0165-1889(98)00016-5

✦ Synopsis

R &IID(0, K

) is an m;1 vector of reduced-form disturbances. The paper derives an analytical eigenvalue method for computing the autoregressive, moving-average, and exogenous parts of the reduced-form solution of a model in the above form. The method routinely handles expectations conditional on several different dates and singular leading coefficient matrices and produces an invertible moving-average part. The paper also derives four new theorems on the existence of a unique solution.