Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70674
Authors: 
Farmer, Roger E.A.
Waggoner, Daniel F.
Zha, Tao
Year of Publication: 
2009
Series/Report no.: 
Working Paper, Federal Reserve Bank of Atlanta 2009-5
Abstract: 
We develop a set of necessary and sufficient conditions for equilibria to be determinate in a class of forward-looking Markov-switching rational expectations models, and we develop an algorithm to check these conditions in practice. We use three examples, based on the new Keynesian model of monetary policy, to illustrate our technique. Our work connects applied econometric models of Markov switching with forward-looking rational expectations models and allows an applied researcher to construct the likelihood function for models in this class over a parameter space that includes a determinate region and an indeterminate region.
Subjects: 
stability
nonlinearity
unique equilibrium
cross-regime indeterminacy
expectations formation
necessary and sufficient conditions
JEL: 
E5
Document Type: 
Working Paper

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