# The Solution of Singular Linear Difference Systems under Rational Expectations

@article{King1998TheSO, title={The Solution of Singular Linear Difference Systems under Rational Expectations}, author={R. G. King and Mark W. Watson}, journal={International Economic Review}, year={1998}, volume={39}, pages={1015-1026} }

Many linear rational expectations macroeconomic models can be cast in the first-order form, AE[subscript t]y[subscript t + 1] = By[subscript t] + CE[subscript t]x[subscript]t, if the matrix A is permitted to be singular. The authors show that there is a unique stable solution under two requirements: (1) the determinantal polynomial Az - B is not zero for some value of z, and (2) a rank condition. The unique solution is characterized using a familiar approach: a canonical variables…

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