Computational Economics

, Volume 40, Issue 3, pp 219–244 | Cite as

Sequential Action and Beliefs Under Partially Observable DSGE Environments

Article

Abstract

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.

Keywords

DSGE Partially Observable Markov Decision Process (POMDP) Observation channel Kalman filter 

JEL Classification

C63 D58 D83 E13 

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Copyright information

© Springer Science+Business Media New York 2012

Authors and Affiliations

  1. 1.School of Economics and FinanceUniversity of St AndrewsFifeUK

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