Multiple Shooting in Rational Expectations Models

14 Pages Posted: 27 Jun 2007 Last revised: 7 Jul 2010

See all articles by David Lipton

David Lipton

National Bureau of Economic Research (NBER)

James M. Poterba

National Bureau of Economic Research (NBER); Massachusetts Institute of Technology (MIT) - Department of Economics

Jeffrey D. Sachs

Columbia University - Columbia Earth Institute; National Bureau of Economic Research (NBER)

Lawrence H. Summers

Harvard University; National Bureau of Economic Research (NBER); Harvard University - Harvard Kennedy School (HKS)

Date Written: June 1983

Abstract

This note describes an algorithm for the solution of rational expectations models with saddlepoint stability properties. The algorithm is based on the method of multiple shooting, which is widely used to solve mathematically similar problems in the physical sciences. Potential applications to economics include models of capital accumulation and valuation, money arid growth, exchange rate determination, and macroeconomic activity. In general, whenever an asset price incorporates information about the future path of key variables, solution algorithms of the type we consider are applicable.

Suggested Citation

Lipton, David and Poterba, James M. and Sachs, Jeffrey D. and Summers, Lawrence H., Multiple Shooting in Rational Expectations Models (June 1983). NBER Working Paper No. t0003. Available at SSRN: https://ssrn.com/abstract=990282

David Lipton

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

James M. Poterba

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
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617-253-1330 (Fax)

Jeffrey D. Sachs

Columbia University - Columbia Earth Institute ( email )

314 Low Library
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212-854-8704 (Phone)
212-854-8702 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Lawrence H. Summers

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States
617-495-1502 (Phone)
617-495-8550 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

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