I am just curious about how to set up the criterion for indeterminacy in a 2nd order approximation. I know we can look at the number of controls and number of explosive engenvalues, but how to do it in a 2nd order system. For example, If we have
c(t+1)=a11c(t)+a12k(t)+b11c(t)^2+b12k(t)^2
k(t+1)=a21c(t)+a22k(t)+b21c(t)^2+b22k(t)^2
How many controls do we have and how many eigenvalues do we have?
Blanchard and Kahn conditions are conditions for local determinacy. They are defined from the first order approximation of the model.
Best,
Stéphane.
[quote=“bigbigben”]I am just curious about how to set up the criterion for indeterminacy in a 2nd order approximation. I know we can look at the number of controls and number of explosive engenvalues, but how to do it in a 2nd order system. For example, If we have
c(t+1)=a11c(t)+a12k(t)+b11c(t)^2+b12k(t)^2
k(t+1)=a21c(t)+a22k(t)+b21c(t)^2+b22k(t)^2
How many controls do we have and how many eigenvalues do we have?[/quote]