Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/204934 
Authors: 
Year of Publication: 
2017
Series/Report no.: 
Discussion Papers No. 17-01
Publisher: 
University of Bern, Department of Economics, Bern
Abstract: 
While rational expectations models with time-varying (random) coefficients have gained some esteem, the understanding of their dynamic properties is still in its infancy. The paper adapts results from the theory of random dynamical systems to solve and analyze the stability of rational expectations models with time-varying (random) coefficients. This theory develops a "linear algebra" in terms of Lyapunov exponents defined as the asymptotic growth rates of trajectories. They replace the eigenvalue analysis used in constant coefficient models and allow the construction of solutions in the spirit of Blanchard and Kahn (1980). The usefulness of these methods and their numerical implementation is illustrated using a canonical New Keynesian model with a time-varying policy rule.
Subjects: 
time-varying rational expectations models
random dynamical systems
Lyapunov exponents
multiplicative ergodic theorem
JEL: 
C02
C61
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.