On the Relationship Between Determinate and MSV Solutions in Linear RE Models

Bennett McCallum ()

No 297, NBER Technical Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper considers the possibility that, in linear rational expectations (RE) models, all determinate (uniquely non-explosive) solutions coincide with the minimum state variable (MSV) solution, which is unique by construction. In univariate specifications of the form y(t) = AE(t)y(t+1) + Cy(t-1) + u(t) that result holds: if a RE solution is unique and non-explosive, then it is the same as the MSV solution. Also, this result holds for multivariate versions if the A and C matrices commute and a certain regularity condition holds. More generally, however, there are models of this form that possess unique non-explosive solutions that differ from their MSV solutions. Examples are provided and a strategy for easily constructing others is outlined.

JEL-codes: C6 (search for similar items in EconPapers)
Date: Written
Note: TWP
View list of references View citations in EconPapers

Downloads: (external link)
http://www.nber.org/papers/t0297.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

Related works:
Working Paper: On the Relationship Between Determinate and MSV Solutions in Linear RE Models
Journal Article: On the relationship between determinate and MSV solutions in linear RE models (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:nbr:nberte:0297

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/t0297
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Technical Working Papers from National Bureau of Economic Research, Inc
Address: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Contact information at EDIRC.
Series data maintained by ().