Solving Endogenous Regime Switching Models

Jean Barthélemy and Magali Marx

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Abstract: This paper solves rational expectations models in which structural parameters switch across multiple regimes according to state-dependent (endogenous) transition probabilities. Assuming small shocks and smooth transition probabilities, we apply a perturbation approach. We first provide for conditions under which a unique bounded equilibrium exists. We then compute first- and second-order approximations. In a new-Keynesian model with monetary policy switching, we document new effects of monetary policy switching when transition probabilities depend on inflation.

Date: 2017-04
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Published in Journal of Economic Dynamics and Control, 2017, 77, pp.1-25. ⟨10.1016/j.jedc.2017.01.011⟩

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Related works:
Journal Article: Solving endogenous regime switching models (2017)
Working Paper: Solving Endogenous Regime Switching Models (2017)
Working Paper: Solving Endogenous Regime Switching Models (2016)
Working Paper: Solving Endogenous Regime Switching Models (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-03945922

DOI: 10.1016/j.jedc.2017.01.011

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