# THE SOLUTION OF LINEAR DIFFERENCE MODELS UNDER RATIONAL EXPECTATIONS

**Olivier J. Blanchard****Charles M. Kahn**

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:

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- www.jstor.org/stable/1912186?seq=2
- mathematical-methods.wikispaces.com/file/view/Blanchard-Kahn+%281980%29.pdf/274676008/Blanchard-Kahn%20%281980%29.pdf
- dept.ku.edu/~empirics/Emp-Coffee/blanchard-kahn_eca80.pdf
- https://ideas.repec.org/a/ecm/emetrp/v48y1980i5p1305-11.html
- www.jstor.org/pss/1912186
- EconPapers.repec.org/RePEc:ecm:emetrp:v:48:y:1980:i:5:p:1305-11

Olivier J. Blanchard, Charles M. Kahn,

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