CiteWeb id: 19800000124

CiteWeb score: 2468

IN HIS SURVEY ON RATIONAL EXPECTATIONS, R. Shiller indicates that the difficulty of obtaining explicit solutions for linear difference models under rational expectations may have hindered their use [14, p. 27]. The present paper attempts to remedy that problem by giving the explicit solution for an important subclass of the model Shiller refers to as the general linear difference model. Section 1 presents the form of the model for which the solution is derived and shows how particular models can be put in this form. Section 2 gives the solution together with the conditions for existence and uniqueness. 1. THE MODEL The model is given by (la), (lb), and (1c) as follows: