Purely classical, frequency-domain methods are useful for solving linear-quadratic dynamic rational expectations models. To illustrate this, generic scalar and multiple-variable problems are solved completely in the frequency domain. The procedure, which utilizes Wiener-Hopi methods to maximize the frequency-domain representation of the objective function, makes ordinarily troublesome second-order conditions transparent, allows infinite-order costs of adjustment, and handles moving average errors easily.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics
- Control and Optimization
- Applied Mathematics