TITLE:
Solution for Rational Expectation Models Free of Complex Numbers
AUTHORS:
Frank Hespeler
KEYWORDS:
Rational Expectation Models, Indeterminacy, Potentially Complex Coefficients
JOURNAL NAME:
Theoretical Economics Letters,
Vol.1 No.3,
November
3,
2011
ABSTRACT: This paper approaches the problem of the potential for complex-valued solutions within linear macroeconomic models with rational expectations. It finds that these problems are associated with a specific solution method for the underlying model. The paper establishes that the danger of complex-valued solutions always can be eliminated by forcing those solutions to fulfill additional constraints. These constraints are essentially restrictions on the degrees of freedoms in indeterminate solutions.