Invertible and non-invertible information sets in linear rational expectations models ∗

@inproceedings{Baxter2010InvertibleAN,
  title={Invertible and non-invertible information sets in linear rational expectations models ∗},
  author={Brad Baxter and Liam Graham and Stephen Wright},
  year={2010}
}
Rational expectations solutions are usually derived by assuming that all state variables relevant to forward-looking behaviour are directly observable, or that they are ‘‘yan invertible function of observables’’ (Mehra and Prescott, 1980). Using a framework that nests linearised DSGE models, we give a number of results useful for the analysis of linear rational expectations models with restricted information sets. We distinguish between instantaneous and asymptotic invertibility, and show that… CONTINUE READING

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