Heiberger, Christopher Klarl, Torben Maußner, Alfred
Year of Publication:
Volkswirtschaftliche Diskussionsreihe, Institut für Volkswirtschaftslehre der Universität Augsburg 319
Klein (2000) advocates the use of the Schur decomposition of a matrix pencil to solve linear rational expectations (RE) models. Meanwhile his algorithm has become a center piece in several computer codes that provide approximate solutions to (non-linear) dynamic stochastic general equilibrium (DSGE) models. A subtlety not resolved by Klein is whether or not a certain Schur decompostion could fail to solve the model while a second one would provide a solution. We show that this cannot happen.
Linear Rational Expectations Models Schur Decomposition DSGE Models