Re: DSE 2015 answer

Posted by knowpraveen on Jun 17, 2016; 5:18pm
URL: http://discussion-forum.276.s1.nabble.com/DSE-2015-answer-tp7600806p7601493.html

In the case of rational expectations, the long run value of Y(t+1) and Yt are the same. It's also the same in the case of adaptive expectations, just in case.

This plainly implies Yt=aYt+yYt^2. Therefore, the long run equilibrium value of Y is 1-a/y