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A new approach to the existence and regularity of linear equilibrium in a noisy rational expectations economy

Youcheng Lou and Shouyang Wang

Journal of Mathematical Economics, 2020, vol. 90, issue C, 119-126

Abstract: This paper gives a new approach to show the existence and regularity of linear equilibrium established by Lou ⓡ al. (2019) for a noisy rational expectations economy. Different from the existing method which essentially requires to find a fixed point of a system of nonlinear algebraic equations, the new approach is operated directly on an alternative form of market-clearing conditions. One main advantage of the new approach is that besides homogeneous-valuation economies, it can also handle the existence of equilibrium in economies with heterogeneous valuations where the existing method for dealing with homogeneous-valuation economies fails to work.

Keywords: Existence and regularity; Rational expectations equilibrium; A new approach (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.jmateco.2020.07.003

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