Why the determinacy condition is a weak criterion in rational expectations models
This paper disputes what Blanchard and Kahn have reported as the solution of linear rational expectation(RE) systems many years ago. Their method leads to traditional determinacy condition which is used very much nowadays. In this paper we have a new look to the mathematical procedure of this solution method and the main problem in their solution will be shown. We introduce a new methodology for modeling the systems with expectation, while in future this way of modeling can be used to replace traditional RE models.
|Date of creation:||20 Nov 2010|
|Publication status:||Published in Proceeding of 2010 International Conference on Information and Finance ( ICIF 2010) (2010): pp. 208-212|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
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- Tetlow, Robert J. & von zur Muehlen, Peter, 2009.
Journal of Economic Dynamics and Control,
Elsevier, vol. 33(2), pages 296-316, February.
- Peter von zur Muehlen & Robert J. Tetlow, 2005. "Robustifying Learnability," Computing in Economics and Finance 2005 437, Society for Computational Economics.
- Robert J. Tetlow & Peter von zur Muehlen, 2006. "Robustifying Learnability," 2006 Meeting Papers 439, Society for Economic Dynamics.
- Robert J. Tetlow & Peter von zur Muehlen, 2005. "Robustifying learnability," Finance and Economics Discussion Series 2005-58, Board of Governors of the Federal Reserve System (U.S.).
- Tetlow, Robert J. & von zur Muehlen, Peter, 2006. "Robustifying learnability," Working Paper Series 0593, European Central Bank.
- Bullard, James & Mitra, Kaushik, 2002. "Learning about monetary policy rules," Journal of Monetary Economics, Elsevier, vol. 49(6), pages 1105-1129, September.
- Kaushik Mitra & James Bullard, "undated". "Learning About Monetary Policy Rules," Discussion Papers 00/41, Department of Economics, University of York.
- James B. Bullard & Kaushik Mitra, 2002. "Learning about monetary policy rules," Working Papers 2000-001, Federal Reserve Bank of St. Louis.
- Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-1311, July. Full references (including those not matched with items on IDEAS)
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