# A Solution Method for Linear Rational Expectation Models under Imperfect Information

Shibayama, Katsuyuki (2011) A Solution Method for Linear Rational Expectation Models under Imperfect Information. Macroeconomic Dynamics, 15 (4). pp. 465-494. ISSN 1365-1005. E-ISSN 1469-8056. (doi:10.1017/S1365100509990897)

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## Abstract

This article presents a solution algorithm for linear rational expectation models under imperfect information, in which some decisions are made based on smaller information sets than others. In our solution representation, imperfect information does not affect the coefficients on crawling variables, which implies that, if a perfect-information model exhibits saddle-path stability, for example, the corresponding imperfect-information models also exhibit saddle-path stability. However, imperfect information can significantly alter the quantitative properties of a model. Indeed, this article demonstrates that, with a predetermined wage contract, the standard RBC model remarkably improves the correlation between labor productivity and output.

Item Type: Article 10.1017/S1365100509990897 Linear rational expectation models, Imperfect information H Social Sciences > HB Economic Theory Faculties > Social Sciences > School of Economics Katsuyuki Shibayama 21 Dec 2018 04:30 UTC 30 May 2019 08:40 UTC https://kar.kent.ac.uk/id/eprint/71410 (The current URI for this page, for reference purposes) https://orcid.org/0000-0003-3472-398X