Using the generalized Schur form to solve a multivariate linear rational expectations model

In this paper, I show how to use the generalized Schur form to solve a system of linear expectational difference equations (a multivariate linear rational expectations model). The method is simple to understand and to use, and is applicable to a large class of rational expectations models. The only hard part is taken care of by just two standard algorithms, both of which are available as freeware on the Internet as part of LAPACK. Like other matrix decomposition based methods, it is also very fast to execute.