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A finite set of equilibria for the indeterminacy of linear rational expectations models (1407.6222v1)
Published 23 Jul 2014 in q-fin.EC
Abstract: This paper demonstrates the existence of a finite set of equilibria in the case of the indeterminacy of linear rational expectations models. The number of equilibria corresponds to the number of ways to select n eigenvectors among a larger set of eigenvectors related to stable eigenvalues. A finite set of equilibria is a substitute to continuous (uncountable) sets of sunspots equilibria, when the number of independent eigenvectors for each stable eigenvalue is equal to one.
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