Rational expectations models with partial information

This paper provides a general solution to the problem of partial information in linear discrete time stochastic rational expectations models. The full information case is first reviewed and the solution of Blanchard and Kahn 4] extended. Then we consider the problem of partial information for the special case where only the current values of some variables are unobserved. The solution can be treated as a straightforward extension to the full information case. In the general problem where in addition to some current variables being unobserved, certain variables are unobserved for all lags, we provide a solution which requires the use of Kalman filters. The paper concludes by examining the covariance properties of the rational expectations system under different informational assumptions.