Sequential Action and Beliefs Under Partially Observable DSGE Environments
- First Online:
- Cite this article as:
- Kim, SH. Comput Econ (2012) 40: 219. doi:10.1007/s10614-012-9323-1
- 83 Downloads
This paper introduces a classification of DSGEs from a Markovian perspective, and positions the class of Partially Observable Markov Decision Process (POMDP) to the center of a generalization of linear rational expectations models. The analysis of the POMDP class builds on the previous development in dynamic controls for linear system, and derives a solution algorithm by formulating an equilibrium as a fixed point of an operator that maps what we observe into what we believe.