IDEAS home Printed from
   My bibliography  Save this paper

Numerical Solution of Rational Expectations Models With and Without Strategic Behaviour


  • Warwick J. McKibbin

    (Reserve Bank of Australia)


The assumption of forward-looking agents in theoretical macroeconomic models has become increasingly popular in recent years. Despite this, the implementation of forward-looking expectations in large econometric models has been slower to emerge. The purpose of this paper is to survey, in a non-technical manner, recent algorithms that have been developed to solve medium-size models when some agents in the models are assumed to have rational expectations. With an intuitive understanding of the algorithms, it is hoped that the technical source literature will be more readily accessible to model builders. The use of game theory in macroeconomics has also seen a resurgence. The second part of this paper develops an algorithm which is useful for solving rational expectations models and can also be used to solve dynamic games between agents with forward-looking expectations. Although derived for a specific application, the algorithm is sufficiently general to be useful for solving a range of non-cooperative games.

Suggested Citation

  • Warwick J. McKibbin, 1987. "Numerical Solution of Rational Expectations Models With and Without Strategic Behaviour," RBA Research Discussion Papers rdp8706, Reserve Bank of Australia.
  • Handle: RePEc:rba:rbardp:rdp8706

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. K K Tang, 1998. "Property Markets and Policies in an Intertemporal General Equilibrium Model," Departmental Working Papers 1999-01, The Australian National University, Arndt-Corden Department of Economics, revised Jan 1999.
    2. Van Ha, Pham & Kompas, Tom, 2016. "Solving intertemporal CGE models in parallel using a singly bordered block diagonal ordering technique," Economic Modelling, Elsevier, vol. 52(PA), pages 3-12.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rba:rbardp:rdp8706. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paula Drew). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.