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THE LINEAR SYSTEMS APPROACH TO LINEAR RATIONAL EXPECTATIONS MODELS
Published online by Cambridge University Press: 17 April 2017
Abstract
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This paper considers linear rational expectations models from the linear systems point of view. Using a generalization of the Wiener-Hopf factorization, the linear systems approach is able to furnish very simple conditions for existence and uniqueness of both particular and generic linear rational expectations models. To illustrate the applicability of this approach, the paper characterizes the structure of stationary and cointegrated solutions, including a generalization of Granger’s representation theorem.
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Footnotes
I am grateful to Peter Phillips, Robert Taylor, and to three anonymous referees for their insightful comments and helpful suggestions. Thanks are also due to Manfred Deistler, Brian D. O. Anderson, Hashem Pesaran, Fabio Canova, Anastasia Kisil, Barbara Rossi, Alexei Onatski, Geert Mesters, Christian Brownlees, Davide Debortoli, Gábor Lugosi, Omiros Papaspiliopoulos, Todd Walker, and Fei Tan as well as seminar participants at Universitat Pompeu Fabra for helpful comments and suggestions. Any remaining errors are the author’s sole responsibility. This paper is dedicated to the memory of Marcelo Reyes (1962–2015). Research for this paper was supported by Spanish Ministry of Economy and Competitiveness projects ECO2012-33247 and ECO2015-68136-P (MINECO/FEDER, UE) and Fundación BBVA Scientific Research Grant PR16-DAT-0043.
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