Solving Dynamic Equilibrium Models by a Method of Undetermined Coefficients

Abstract: I present an undetermined coefficients method for obtaining a linear approximating to the solution of a class of dynamic, rational expectations models. I also show how that solution can be used to compute a model's implications for impulse response functions and for second moments.

Key words: Expectational difference equations, Euler equation, matrix polynomial, real business cycle model, time-to-build, frequency domain

Author: Lawrence J. Christiano

Christiano (2002).pdf