Predetermined and non-predetermined variables in rational expectations models
The distinctiof between predetermined and non-predetermined variables is a crucial one in rational expectations models. I consider and reject two definitions, one proposed by Blanchard and Kahn and one by Chow. Both definitions lead to possible misc1assifications. Instead I propose the following defin)tion. A variable is non-`redetermined if and only if its current value is a function of current anticipations mf future values of endogenous and/or exogenous variables. This definition focuses on the essential economic property of non-predetermined variables: unlike predetermined variables they can respond instantaneously to changes in expectations due to "news." The new definition also fits the structure of rational expectations models solution algorithms such as the one proposed by Blanchard and Kahn.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.