On the Assumption of Convergent Rational Expectations

Edwin Burmeister

Chapter 10 in Issues in Contemporary Macroeconomics and Distribution, 1985, pp 258-269 from Palgrave Macmillan

Abstract: Abstract Both rational expectations and perfect foresight models are featured by the following indeterminacy problem: for given initial values of predetermined state variables, there may exist more than one dynamic equilibrium path. This type of indeterminacy arises because there are non-state variables whose initial values must be determined using criteria outside of the formal model. In general ‘the model’ can be expanded to include restrictions that uniquely determine these non-state variables. However, if there are many equally plausible sets of restrictions, the uniqueness issue remains unresolved.

Keywords: Rational Expectation; Characteristic Root; White Noise Process; Perfect Foresight; Stable Path (search for similar items in EconPapers)
Date: 1985
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DOI: 10.1007/978-1-349-06879-1_10

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