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A new approach to the existence and regularity of linear equilibrium in a noisy rational expectations economy

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  • Lou, Youcheng
  • Wang, Shouyang

Abstract

This paper gives a new approach to show the existence and regularity of linear equilibrium established by Lou ⓡ al. (2019) for a noisy rational expectations economy. Different from the existing method which essentially requires to find a fixed point of a system of nonlinear algebraic equations, the new approach is operated directly on an alternative form of market-clearing conditions. One main advantage of the new approach is that besides homogeneous-valuation economies, it can also handle the existence of equilibrium in economies with heterogeneous valuations where the existing method for dealing with homogeneous-valuation economies fails to work.

Suggested Citation

  • Lou, Youcheng & Wang, Shouyang, 2020. "A new approach to the existence and regularity of linear equilibrium in a noisy rational expectations economy," Journal of Mathematical Economics, Elsevier, vol. 90(C), pages 119-126.
    • Handle: RePEc:eee:mateco:v:90:y:2020:i:c:p:119-126
    DOI: 10.1016/j.jmateco.2020.07.003
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    References listed on IDEAS

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    5. Lou, Youcheng & Parsa, Sahar & Ray, Debraj & Li, Duan & Wang, Shouyang, 2019. "Information aggregation in a financial market with general signal structure," Journal of Economic Theory, Elsevier, vol. 183(C), pages 594-624.
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    Cited by:

    1. Lou, Youcheng & Wang, Shouyang, 2021. "The equivalence of two rational expectations equilibrium economies with different approaches to processing neighbors’ information," Mathematical Social Sciences, Elsevier, vol. 109(C), pages 93-105.

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