Abstract
This note summarizes the salient derivations of Martinez-Garcia (2018). Specifically, it shows that the solution to a large class of linear rational expectations (LRE) models can be represented in finite-order VAR form. Martinez-Garcia (2018) proposes a unified approach that uses a companion quadratic matrix equation to decouple the backward- and forward-looking parts of the canonical form of the LRE model and a Sylvester equation to pin down the solution and simplify its characterization so it can be expressed as a finite-order VAR.
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