Time–varying rational expectations models

Klaus Neusser ()

Journal of Economic Dynamics and Control, 2019, vol. 107, issue C, -

Abstract: This paper develops a comprehensive theory for rational expectations models with time–varying (random) coefficients. Based on the Multiplicative Ergodic Theorem it develops a “linear algebra” in terms of Lyapunov exponents, defined as the asymptotic growth rates of trajectories. Together with their associated Lyapunov spaces they provide a perfect substitute for the eigenvalue/eigenspace analysis used in constant coefficient models. In particular, they allow the construction of explicit solution formulas similar to the standard case. These methods and their numerical implementation is illustrated using a canonical New Keynesian model with a time–varying policy rule and lagged endogenous variables.

Keywords: Time–varying rational expectations models; Lyapunov exponents; Multiplicative Ergodic Theorem (search for similar items in EconPapers)
JEL-codes: C02 C61 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165188919301307
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:107:y:2019:i:c:3

DOI: 10.1016/j.jedc.2019.103731

Access Statistics for this article

Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

More articles in Journal of Economic Dynamics and Control from Elsevier
Bibliographic data for series maintained by Catherine Liu ().