Title: The dimension of the set of causal solutions of linear multivariate rational expectations models
Authors: Bernd Funovits - University of Helsinki (Finland) [presenting]
Abstract: The aim is to analyze the number of free parameters and solutions of the structural difference equation obtained from a linear multivariate rational expectations model. The theory of polynomial matrix factorization is used to amend errors previous theorems. Stochastic singularity is analyzed and certain restrictions on the solution set are introduced in order to compare the approach with the most popular solution methods. This model is the basis for identifiability analysis of determinate as well as indeterminate equilibria, allowing for singular spectral densities and without assuming minimality of the associated state space system.