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Solution for Rational Expectation Models Free of Complex Numbers

DOI: 10.4236/tel.2011.13011, PP. 47-52

Keywords: Rational Expectation Models, Indeterminacy, Potentially Complex Coefficients

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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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