Methods of Solution and Simulation for Dynamic Rational Expectations Models

Olivier Blanchard

No 28, NBER Technical Working Papers from National Bureau of Economic Research, Inc

Abstract: Many methods have been proposed for the solution and simulation of medium or large size models under the assumption of rational expectations. The purpose of this paper is to present these methods, and to show how and where each can be applied. The methods fall into two groups. Methods in the first can be used to solve for perfect foresight paths in non-linear models. Methods in the second can be used in linear models, to solve either for paths or processes followed by endogenous variables. All the methods described here have been used in empirical applications and computer algorithms are available for most.

Date: 1983-03
Note: EFG
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Published as Blanchard, Olivier J. "Methods of Solution and Simulation for Dynamic Rational Expectations Models." Economie Appliquee, Vol. XXXVI

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