Solving Nonlinear Rational Expectations Models by Parametrized Expectations: Convergence to Stationary Solutions

1994 ◽  
Author(s):  
Albert Marcet ◽  
David A. Marshall
Keyword(s):  
Rational Expectations ◽  
Stationary Solutions ◽  
Nonlinear Rational Expectations Models

Solutions of Linear Rational Expectations Models

1985 ◽  
Vol 1 (3) ◽  
pp. 341-368 ◽  
Author(s):  
L. Broze ◽  
C. Gourieroux ◽  
A. Szafarz
Keyword(s):  
Rational Expectations ◽  
Moving Average ◽  
Stationary Solutions ◽  
Global Approach ◽  
Number Of Solutions ◽  
Simultaneous Treatment ◽  
Moving Average Representation ◽  
Natural Parametrization ◽  
Average Representation ◽  
Independent Parameters

Linear rational expectations models generally have a large number of solutions. It is thus important to describe them exhaustively in order to study their properties and subsequently estimate which solution best fits the data. In this paper, a global approach is suggested allowing a simultaneous treatment of all possible cases. The fundamental concepts are the revision processes appearing in the procedure of updating expectations. It isfound that the set of solutions is completely described by using a limitednumber of these processes. We show how the method may be applied to determine the set of stationary solutions admitting an infinite moving-average representation. We give a natural parametrization of this set and discuss the exact number of independent parameters.

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