LINEAR-QUADRATIC OPTIMIZATION FOR MODELS WITH RATIONAL EXPECTATIONS

1 December 1999

journal article
Published by Cambridge University Press (CUP) in Macroeconomic Dynamics

Vol. 3 (4) , 534-543
https://doi.org/10.1017/s1365100599013048

Abstract

We present a method for using rational expectations in a linear-quadratic optimization framework. Following the approach put forward by Sims, we solve the model through a QZ decomposition, which is generally easier to implement than the more widely used Blanchard-Kahn method.

Keywords

RATIONAL EXPECTATIONS
STOCHASTIC OPTIMIZATION
NUMERICAL EXPERIMENTS
LINEAR QUADRATIC OPTIMIZATION

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