In this paper we present a method for using rational expectations in a linear-quadratic optimizationframework. Following the approach put forward by Sims, we solve the model through a QZdecomposition, which is generally easier to implement than the more widely used method of Blanchardand Kahn.

A solution method is derived in this paper for solving a system of linear rational-expectations equation with lagged expectations (e.g., models incorporating sticky information) using the method of undetermined coefficients for the infinite MA representation. The method applies a combination of...

A dynamic economy with markets of equities and bonds is considered. The rational expectations equilibrium is defined in an asset pricing model and a condition under which the Modigliani-Miller theorem holds is shown. In an aggregate model the existence of a rational expectations equilibrium is...