Munich Personal RePEc Archive

Why the determinacy condition is a weak criterion in rational expectations models

Mostafavi, Moeen and Shakouri G., Hamed and Fatehi, Ali-Reza (2010): Why the determinacy condition is a weak criterion in rational expectations models. Published in: Proceeding of 2010 International Conference on Information and Finance ( ICIF 2010) (26. November 2010): pp. 208-212.

[img]
Preview
PDF
MPRA_paper_28320.pdf

Download (126Kb) | Preview

Abstract

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.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.