How to Get the Blanchard-Kahn Form from a General Linear Rational Expectations Model
In this paper we prove that every linear model with rational expectations can be transformed by means of an one-to-one mapping into another model which has one of the following properties: i) it is degenerated, ii) it is backward, iii) it has a Blanchard-Kahn form. In addition to some simple illustrations, we provide two applications on two nonlinear forward-looking economic models in order to show how to use our theoretical analysis for local stability assessement.
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- Blanchard, Olivier J, 1985.
"Debt, Deficits, and Finite Horizons,"
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