Methods of Solution and Simulation for Dynamic Rational Expectations Models

27 Pages Posted: 3 Jul 2007 Last revised: 1 Aug 2010

See all articles by Olivier J. Blanchard

Olivier J. Blanchard

National Bureau of Economic Research (NBER); Peter G. Peterson Institute for International Economics

Date Written: March 1983

Abstract

Many methods have been proposed for the solution and simulation of medium or large size models under the assumption of rational expectations. The purpose of this paper is to present these methods, and to show how and where each can be applied. The methods fall into two groups. Methods in the first can be used to solve for perfect foresight paths in non-linear models. Methods in the second can be used in linear models, to solve either for paths or processes followed by endogenous variables. All the methods described here have been used in empirical applications and computer algorithms are available for most.

Suggested Citation

Blanchard, Olivier J., Methods of Solution and Simulation for Dynamic Rational Expectations Models (March 1983). NBER Working Paper No. t0028. Available at SSRN: https://ssrn.com/abstract=408181

Olivier J. Blanchard (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
18
Abstract Views
293
PlumX Metrics