Multiple Shooting in Rational Expectations Models

Lipton, David; Poterba, James; Sachs, Jeffrey D.; Summers, Lawrence

This note describes an algorithm for the solution of rational expectations models with saddlepoint stability properties. The algorithm is based on the method of multiple shooting, which is widely used to solve mathematically similar problems in the physical sciences. Potential applications to economics include models of capital accumulation and valuation, money arid growth, exchange rate determination, and macroeconomic activity. In general, whenever an asset price incorporates information about the future path of key variables, solution algorithms of the type we consider are applicable.


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Academic Units
Earth Institute
National Bureau of Economic Research
NBER Technical Working Paper, 3
Published Here
September 28, 2009