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- Title
THE SOLUTION OF LINEAR DIFFERENCE MODELS UNDER RATIONAL EXPECTATIONS.
- Authors
Blanchard, Oliver Jean; Kahn, Charles M.
- Abstract
The paper addresses the difficulty of obtaining explicit solutions for linear difference models under rational expectations. The explicit solution for an important subclass of the model R. Shiller refers to as the general linear difference model is presented. The paper features the form of the model for which the solution is derived and demonstrates how particular models can be put in such form. Although the class of models reducible to this form includes most existing models, Example C demonstrates that there exist models which cannot be reduced to such form.
- Subjects
RATIONAL expectations (Economic theory); MATHEMATICAL models of consumption; SHILLER, Robert J., 1946-; UNCERTAINTY; LINEAR differential equations; LINEAR systems; MODELS &; modelmaking; ECONOMIC forecasting; TIME &; economic reactions
- Publication
Econometrica, 1980, Vol 48, Issue 5, p1305
- ISSN
0012-9682
- Publication type
Article
- DOI
10.2307/1912186