Understanding Markov-switching rational expectations models

Roger Farmer, Daniel Waggoner and Tao Zha

No 2009-05, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

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. .

Keywords: Econometric; models (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-cba
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Citations: View citations in EconPapers (144)

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Journal Article: Understanding Markov-switching rational expectations models (2009)
Working Paper: Understanding Markov-Switching Rational Expectations Models (2009)
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