Prediction Formulas for Continuous Time Linear Rational Expectations Models

January 1991 | Chapter

Prediction Formulas for Continuous Time Linear Rational Expectations Models

Lars Peter Hansen and Thomas J. Sargent

In this note we derive optimal prediction formulas to be used in solving continuous time rational expectations models. In these deriva- tions we employ Laplace transforms in a manner analogous to the use of z transforms for solving discrete time optimal prediction problems in Hansen and Sargent (1980a, Appendix A). The formulas are intended to play the same role for continuous time models that the discrete time formulas for optimal predictions of-geometric distributed leads did in Hansen and Sargent (1980a).

@article{hansen:1991,

  title={Prediction Formulas for Continuous Time Linear Rational Expectations Models},
  author={Hansen, Lars Peter and Roberds, William and Sargent, Thomas J},
  journal={Rational Expectations Econometrics},
  year={1991},
  publisher={Westview Press Cambridge}
}