Author: William A. Branch
Publisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Regime-switching rational expectations models, in which the parameters of the model evolve according to a finite state Markov process, have properties that differentiate them from linear models. Issues that are well understood in linear contexts, such as equilibrium determinacy and stability under adaptive learning, re-emerge in this new context. This paper outlines these issues and defines two classes of equilibria that emerge from regime-switching models. The distinguishing feature between the two classes is whether the conditional density of the endogenous state variables depends on past regimes. An assumption on whether agents condition their expectations on past regimes has important implications for determinacy and equilibrium dynamics. The paper addresses the stability properties of the different classes of equilibria under adaptive learning, extending the learning literature to a non-linear framework.
Expectational Stability in Regime-switching Rational Expectations Models
Author: William A. Branch
Publisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Regime-switching rational expectations models, in which the parameters of the model evolve according to a finite state Markov process, have properties that differentiate them from linear models. Issues that are well understood in linear contexts, such as equilibrium determinacy and stability under adaptive learning, re-emerge in this new context. This paper outlines these issues and defines two classes of equilibria that emerge from regime-switching models. The distinguishing feature between the two classes is whether the conditional density of the endogenous state variables depends on past regimes. An assumption on whether agents condition their expectations on past regimes has important implications for determinacy and equilibrium dynamics. The paper addresses the stability properties of the different classes of equilibria under adaptive learning, extending the learning literature to a non-linear framework.
Publisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Regime-switching rational expectations models, in which the parameters of the model evolve according to a finite state Markov process, have properties that differentiate them from linear models. Issues that are well understood in linear contexts, such as equilibrium determinacy and stability under adaptive learning, re-emerge in this new context. This paper outlines these issues and defines two classes of equilibria that emerge from regime-switching models. The distinguishing feature between the two classes is whether the conditional density of the endogenous state variables depends on past regimes. An assumption on whether agents condition their expectations on past regimes has important implications for determinacy and equilibrium dynamics. The paper addresses the stability properties of the different classes of equilibria under adaptive learning, extending the learning literature to a non-linear framework.
Expectational Stability in Regime-Switching Rational Expectations Models
Author: William Branch
Publisher:
ISBN:
Category :
Languages : en
Pages : 35
Book Description
Regime-switching rational expectations models, in which the parameters of the model evolve according to a amp;finite state Markov process, have properties that differentiate them from linear models. Issues that are well understood in linear contexts, such as equilibrium determinacy and stability under adaptive learning, re-emerge in this new context. This paper outlines these issues and deamp;fines two classes of equilibria that emerge from regime-switching models. The distinguishing feature between the two classes is whether the conditional density of the endogenous state variables depends on past regimes. An assumption on whether agents condition their expectations on past regimes has important implications for determinacy and equilibrium dynamics. The paper addresses the stability properties of the different classes of equilibria under adaptive learning, extending the learning literature to a non-linear framework.
Publisher:
ISBN:
Category :
Languages : en
Pages : 35
Book Description
Regime-switching rational expectations models, in which the parameters of the model evolve according to a amp;finite state Markov process, have properties that differentiate them from linear models. Issues that are well understood in linear contexts, such as equilibrium determinacy and stability under adaptive learning, re-emerge in this new context. This paper outlines these issues and deamp;fines two classes of equilibria that emerge from regime-switching models. The distinguishing feature between the two classes is whether the conditional density of the endogenous state variables depends on past regimes. An assumption on whether agents condition their expectations on past regimes has important implications for determinacy and equilibrium dynamics. The paper addresses the stability properties of the different classes of equilibria under adaptive learning, extending the learning literature to a non-linear framework.
A Unified Approach to Determinacy Conditions with Regime Switching
Author: Jean Barthelemy
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
The conditions that ensure the existence of a unique stable equilibrium - determinacy conditions - for rational expectations models with Markov switching depend on the stability concept, contrasting with standard linear rational expectations models. In this paper, we offer a unified framework for the two commonly used stability concepts (boundedness and mean-square stability) and derive determinacy conditions based on simple metrics. We especially show that, qualitatively, mean-square stable solutions are always at least as many as bounded solutions: no mean-square stable solution implies no bounded solution, a unique mean-square stable solution implies either a unique or no bounded solution, and a model with multiple mean-square solutions can have multiple, unique or no bounded solution. We then provide for two economic applications and show that, in these examples, the determinacy frontiers for the two stability concepts do not perfectly coincide but the difference appears only marginal economically.
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
The conditions that ensure the existence of a unique stable equilibrium - determinacy conditions - for rational expectations models with Markov switching depend on the stability concept, contrasting with standard linear rational expectations models. In this paper, we offer a unified framework for the two commonly used stability concepts (boundedness and mean-square stability) and derive determinacy conditions based on simple metrics. We especially show that, qualitatively, mean-square stable solutions are always at least as many as bounded solutions: no mean-square stable solution implies no bounded solution, a unique mean-square stable solution implies either a unique or no bounded solution, and a model with multiple mean-square solutions can have multiple, unique or no bounded solution. We then provide for two economic applications and show that, in these examples, the determinacy frontiers for the two stability concepts do not perfectly coincide but the difference appears only marginal economically.
Roles of the Minimal State Variable Criterion in Rational Expectations Models
Author: Bennett T. McCallum
Publisher:
ISBN:
Category : Monetary policy
Languages : en
Pages : 50
Book Description
Publisher:
ISBN:
Category : Monetary policy
Languages : en
Pages : 50
Book Description
Assessing Rational Expectations 2
Author: Roger Guesnerie
Publisher: MIT Press
ISBN: 9780262262903
Category : Business & Economics
Languages : en
Pages : 498
Book Description
A theoretical assessment of the Rational Expectations Hypothesis through subjecting a collection of economic models to an "eductive stability" test. The rational expectations hypothesis (REH) dominates economic modeling in areas ranging from monetary theory, macroeconomics, and general equilibrium to finance. In this book, Roger Guesnerie continues the critical analysis of the REH begun in his Assessing Rational Expectations: Sunspot Multiplicity and Economic Fluctuations, which dealt with the questions raised by multiplicity and its implications for a theory of endogenous fluctuations. This second volume emphasizes "eductive" learning: relying on careful reasoning, agents must deduce what other agents guess, a process that differs from the standard evolutionary learning experience in which agents make decisions about the future based on past experiences. A broad "eductive" stability test is proposed that includes common knowledge and results in a unique "rationalizable expectations equilibrium." This test provides the basis for Guesnerie's theoretical assessment of the plausibility of the REH's expectational coordination, emphasizing, for different categories of economic models, conditions for the REH's success or failure. Guesnerie begins by presenting the concepts and methods of the eductive stability analysis in selected partial equilibrium models. He then explores to what extent general equilibrium strategic complementarities interfere with partial equilibrium considerations in the formation of stable expectations. Guesnerie next examines two issues relating to eductive stability in financial market models, speculation and asymmetric price information. The dynamic settings of an infinite horizon model are then taken up, and particular standard and generalized saddle-path solutions are scrutinized. Guesnerie concludes with a review of general questions and some "cautious" remarks on the policy implications of his analysis.
Publisher: MIT Press
ISBN: 9780262262903
Category : Business & Economics
Languages : en
Pages : 498
Book Description
A theoretical assessment of the Rational Expectations Hypothesis through subjecting a collection of economic models to an "eductive stability" test. The rational expectations hypothesis (REH) dominates economic modeling in areas ranging from monetary theory, macroeconomics, and general equilibrium to finance. In this book, Roger Guesnerie continues the critical analysis of the REH begun in his Assessing Rational Expectations: Sunspot Multiplicity and Economic Fluctuations, which dealt with the questions raised by multiplicity and its implications for a theory of endogenous fluctuations. This second volume emphasizes "eductive" learning: relying on careful reasoning, agents must deduce what other agents guess, a process that differs from the standard evolutionary learning experience in which agents make decisions about the future based on past experiences. A broad "eductive" stability test is proposed that includes common knowledge and results in a unique "rationalizable expectations equilibrium." This test provides the basis for Guesnerie's theoretical assessment of the plausibility of the REH's expectational coordination, emphasizing, for different categories of economic models, conditions for the REH's success or failure. Guesnerie begins by presenting the concepts and methods of the eductive stability analysis in selected partial equilibrium models. He then explores to what extent general equilibrium strategic complementarities interfere with partial equilibrium considerations in the formation of stable expectations. Guesnerie next examines two issues relating to eductive stability in financial market models, speculation and asymmetric price information. The dynamic settings of an infinite horizon model are then taken up, and particular standard and generalized saddle-path solutions are scrutinized. Guesnerie concludes with a review of general questions and some "cautious" remarks on the policy implications of his analysis.
A Pitfall of Expectational Stability Analysis
Solving Large Scale Rational Expectation Models
Author: Jess Gaspar
Publisher:
ISBN:
Category : Macroeconomics
Languages : en
Pages : 60
Book Description
Publisher:
ISBN:
Category : Macroeconomics
Languages : en
Pages : 60
Book Description
Deterministic Continuous Time Rational Expectations Models with Too Many Stable Roots
Author: Phillip Lawler
Publisher:
ISBN:
Category : Economics
Languages : en
Pages :
Book Description
Publisher:
ISBN:
Category : Economics
Languages : en
Pages :
Book Description
Discrete-Time Markov Jump Linear Systems
Author: O.L.V. Costa
Publisher: Springer Science & Business Media
ISBN: 1846280826
Category : Mathematics
Languages : en
Pages : 287
Book Description
This will be the most up-to-date book in the area (the closest competition was published in 1990) This book takes a new slant and is in discrete rather than continuous time
Publisher: Springer Science & Business Media
ISBN: 1846280826
Category : Mathematics
Languages : en
Pages : 287
Book Description
This will be the most up-to-date book in the area (the closest competition was published in 1990) This book takes a new slant and is in discrete rather than continuous time
Oil and Macroeconomic (in)stability
Author: Hilde Christiane Bjørnland
Publisher:
ISBN: 9788275539340
Category :
Languages : en
Pages :
Book Description
Publisher:
ISBN: 9788275539340
Category :
Languages : en
Pages :
Book Description