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Sequential Action and Beliefs under Partially Observable DSGE Environments

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  • Seong-Hoon Kim

Abstract

This paper introduces a classification of DSGEs from a Markovian perspective, and positions the class of POMDP (Partially Observable Markov DecisionProcess) to the center of a generalization of linear rational expectations models. The analysis of the POMDP class builds on the previous development in dynamic controls for linear system, and derives a solution algorithm by formulating the equilibrium as a fixed point of an operator that maps what we observe into what we believe.

Suggested Citation

  • Seong-Hoon Kim, 2011. "Sequential Action and Beliefs under Partially Observable DSGE Environments," CDMA Working Paper Series 201116, Centre for Dynamic Macroeconomic Analysis.
  • Handle: RePEc:san:cdmawp:1116
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    More about this item

    Keywords

    DSGE; Partially Observable Markov Decision Process (POMDP); Observation Channel; Kalman filter.;

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical

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