Christopher Heiberger, Torben Klarl, Alfred Maussner

A Note on the Uniqueness of Solutions to Rational Expectations Models


Abstract:

Klein (2000) advocates the use of the Schur decomposition of a matrix pencil to solve linear rational expectations (RE) models. Meanwhile his algorithm has become a center piece in several computer codes that provide approximate  solutions to (non-linear) dynamic stochastic general equilibrium (DSGE) models. A subtlety not resolved by Klein is whether or not a certain Schur decompostion could fail to solve the model while a second one would provide a solution. We show that this cannot happen.

JEL: C63, C88, E37

Paper:

Paper available as pdf-file. Beitrag Nr. 319, Volkswirtschaftliche Diskussionsreihe, Institut für Volkswirtschaftslehre der Universität Augsburg

Contact:

Christopher Heiberger, University of Augsburg, Department of Economics, D-86135 Augsburg, Germany, phone +49-821-598-4178, fax +49-821-598-4231
email: christopher.heiberger@wiwi.uni-augsburg.de
Torben Klarl, University of Augsburg, Department of Economics, D-86135 Augsburg, Germany, phone +49-821-598-4189, fax +49-821-598-4231
email: torben.alexander.klarl@wiwi.uni-augsburg.de
Alfred Maussner, University of Augsburg, Department of Economics, D-86135 Augsburg, Germany, phone +49-821-598-4187, fax +49-821-598-4231
email: alfred.maussner@wiwi.uni-augsburg.de


Bo., 04.12.2012