Mathematics for Econometrics pp 126-141 | Cite as

# Systems of Difference Equations with Constant Coefficients

Chapter

## Abstract

The reader will recall that the second-order difference equation
where
and find the most general form of its solution, called the
where, assuming

$${{a}_{0}}{{y}_{t}} + {{a}_{1}}{{y}_{{t + 1}}} + {{a}_{2}}{{y}_{{t + 2}}} = g(t + 2),$$

(78)

*y*_{ t }is the*scalar*dependent variable, the*a*_{ h }*i*= 0,1,2, are the (constant) coefficients, and*g(t)*is the real-valued “forcing function,” is soived in two steps. First we consider the homogeneous part$${{a}_{0}}{{y}_{t}} + {{a}_{1}}{{y}_{{t + 1}}} + {{a}_{2}}{{y}_{{t + 2}}} = 0,$$

*general solution to the homogeneous part*. Then we find just one solution to the equation in (78), called the*particular solution*. The sum of the general solution to the homogeneous part and the particular solution is said to be the*general solution*to the equation. What is meant by the “general solution,” denoted, say, by y_{f}*, is that*y**satisfies (78) and that it can be made to satisfy any prespecified set of “initial conditions.” To appreciate this aspect rewrite (78) as$${{y}_{{t + 2}}} = \bar{g}(t + 2) + {{\bar{a}}_{1}}{{y}_{{1 + 1}}} + {{\bar{a}}_{0}}{{y}_{t}},$$

(79)

*a*_{2}≠ 0,$$\bar{g}\left( {t + 2} \right) = \frac{1}{{{{a}_{2}}}}g\left( {t + 2} \right),\quad {{\bar{a}}_{1}} = \frac{{{{a}_{1}}}}{{{{a}_{2}}}},\quad {{\bar{a}}_{0}} = \frac{{{{a}_{0}}}}{{{{a}_{2}}}}.$$

## Keywords

General Solution Difference Equation Unit Circle Constant Coefficient Characteristic Root
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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© Springer Science+Business Media New York 1984