The Identification Problem for Linear Rational Expectations Models

• Authors: Piotr Zwiernik.
• BSE Working Paper: 112209 | September 19
• Keywords: linear systems , identification , linear rational expectations models , vector autoregressive moving average models
• JEL codes: C10, C22, C32
• linear systems
• identification
• linear rational expectations models
• vector autoregressive moving average models

We consider the problem of the identification of stationary solutions to linear rational expectations models from the second moments of observable data. Observational equivalence is characterized and necessary and sufficient conditions are provided for: (i) identification under affine restrictions, (ii) generic identification under affine restrictions of analytically parametrized models, and (iii) local identification under non-linear restrictions. The results strongly resemble the classical theory for VARMA models although significant points of departure are also documented.