Paper #1511

Título:

The linear systems approach to linear rational expectations models

Autor:

Majid M. Al-Sadoon

Data:

Enero 2016

Resumen:

This paper considers linear rational expectations models from the linear systems point of view. Using a generalization of the Wiener-Hopf factorization, the linear systems approach is able to furnish very simple conditions for existence and uniqueness of both particular and generic linear rational expectations models. As applications of this approach, the paper provides results for existence of sequential solutions to block triangular systems and provides an exhaustive description of stationary and unit root solutions, including a generalization of Granger's representation theorem. In addition, the paper provides an innovative numerical solution to the Wiener-Hopf factorization and its generalization.

Palabras clave:

Rational expectations, linear systems, Wiener-Hopf factorization, vector autoregressive processes, block triangular system, stability, cointegration.

Códigos JEL:

C32, C51, C62, C63, C65.

Área de investigación:

Estadística, Econometría y Métodos Cuantitativos

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