Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70735
Authors: 
Farmer, Roger E. A.
Waggoner, Daniel F.
Zha, Tao
Year of Publication: 
2008
Series/Report no.: 
Working Paper, Federal Reserve Bank of Atlanta 2008-19
Abstract: 
Davig and Leeper (2007) have proposed a condition they call the generalized Taylor principle to rule out indeterminate equilibria in a version of the New Keynesian model, where the parameters of the policy rule follow a Markov-switching process. We show that although their condition rules out a subset of indeterminate equilibria, it does not establish uniqueness of the fundamental equilibrium. We discuss the differences between indeterminate fundamental equilibria included by Davig and Leeper's condition and fundamental equilibria that their condition misses.
Subjects: 
bounded solutions
multiple fundamental equilibria
historical dependence
JEL: 
E52
Document Type: 
Working Paper

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