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A Fast Algorithm for Solving Rational Expectations Models

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  • Wilcoxen, Peter

Abstract

At the heart of most rational expectations models is a system of first order differential equations describing the behaviour of the model's endogenous variables. The methods commonly used to solve these models, such as multiple shooting and Fair's algorithm, can be very slow to converge. This paper describes a generalization of Fair's technique that is significantly faster while providing equally accurate results.

Suggested Citation

  • Wilcoxen, Peter, 1990. "A Fast Algorithm for Solving Rational Expectations Models," Impact Project Archive 295063, Impact Research Centre, University of Melbourne.
    • Handle: RePEc:ags:ircipa:295063
    DOI: 10.22004/ag.econ.295063
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    References listed on IDEAS

    as
    1. Fair, Ray C & Taylor, John B, 1983. "Solution and Maximum Likelihood Estimation of Dynamic Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 51(4), pages 1169-1185, July.
    2. Fair, Ray C, 1979. "An Analysis of a Macro-Econometric Model with Rational Expectations in the Bond and Stock Markets," American Economic Review, American Economic Association, vol. 69(4), pages 539-552, September.
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