On the Solution of Linear Difference Equations with Rational Expectations

Antoine d'Autume ()
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Antoine d'Autume: EUREQUA - Equipe Universitaire de Recherche en Economie Quantitative - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

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Abstract: This article offers a new method of solution for linear difference equations with Rational Expectations. We provide a description of the complete set of solutions which is shown to depend on arbitrary martingales. We thus avoid the use of "differences of martingales", as introduced by Gourieroux, Broze, Szafarz, while describing the general solution as a dynamic equation with lower order. At the same time we provide a simple algorithm, based on polynomial divisions, to calculate some basic solutions, namely all ARMA solutions.

Keywords: linear difference equations; Rational Expectations (search for similar items in EconPapers)
Date: 1990-10
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Published in Review of Economic Studies, 1990, 57 (4), pp.677-688

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00430048

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