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Solution for Rational Expectation Models Free of Complex Numbers

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DOI: 10.4236/tel.2011.13011    5,063 Downloads   9,328 Views  
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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.

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F. Hespeler, "Solution for Rational Expectation Models Free of Complex Numbers," Theoretical Economics Letters, Vol. 1 No. 3, 2011, pp. 47-52. doi: 10.4236/tel.2011.13011.

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