Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70723
Authors: 
Farmer, Roger E. A.
Waggoner, Daniel F.
Zha, Tao
Year of Publication: 
2007
Series/Report no.: 
Working Paper, Federal Reserve Bank of Atlanta 2006-19a
Abstract: 
This paper is about the properties of Markov-switching rational expectations (MSRE) models. We discuss possible solution concepts for MSRE models, distinguishing between stationary and bounded equilibria. For the case of models with one variable, we provide a necessary and sufficient condition for uniqueness of a bounded equilibrium, and we relate this condition to an alternative, the generalized Taylor principle suggested by Davig and Leeper. We provide examples of models with multiple bounded and multiple stationary equilibria which suggest that it may be more difficult to rule out nonfundamental equilibria in MSRE models than in the single-regime case where the Taylor principle is known to guarantee local uniqueness.
Subjects: 
policy rule
inflation
serial dependence
multiple equilibria
stationary equilibrium
bounded equilibrium
JEL: 
E5
Document Type: 
Working Paper

Files in This Item:
File
Size
548.29 kB





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