We provide a computationally simple method of analyzing the e ects of fundamental and sunspot shocks in linear rational expectations models when the equilibrium is indeterminate. Under indeterminacy sunspots can a ect model dynamics through endogenous forecast errors. Moreover, the e ect of fundamen
Equilibrium beliefs in linear rational expectations models
โ Scribed by K.J. Matheny
- Publisher
- Elsevier Science
- Year
- 1998
- Tongue
- English
- Weight
- 157 KB
- Volume
- 23
- Category
- Article
- ISSN
- 0165-1889
No coin nor oath required. For personal study only.
๐ SIMILAR VOLUMES
This paper presents e$cient methods for the solution of xnite-horizon multivariate linear rational expectations (MLRE) models, linking the solution of such models to the problem of solving sparse linear equation systems with a block-tridiagonal coe$cient matrix structure. Two numerical schemes for t
## 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 o