How to compute perfect foresight equilibria

Christian Keuschnigg

No 150, Discussion Papers, Series II from University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy"

Abstract: The paper reviews an algorithm for the iterative solution of rational expectations models. It shows in detail how general equilibrium models with perfect foresight and intertemporally optimizing behavior must be set up to be solved numerically with the algorithm. Three examples of intertemporal equilibrium models with increasing complexity are given. An extensive sensitivity analysis with respect to changes in the control parameters tests the efficiency of the algorithm in solving the examples.

Date: 1991
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