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The RPEs of RBCs and other DSGEs

David Evans, George Evans and Bruce McGough

Journal of Economic Dynamics and Control, 2022, vol. 143, issue C

Abstract: In a broad class of non-linear representative agent models, represented by a system of difference equations, we replace rational expectations with linear forecast models conditioning on a predetermined set of regressors. Within this framework, a restricted perceptions equilibrium (RPE) corresponds to a forecast rule that is optimal within that class of models. Local uniqueness of a stationary rational expectations equilibrium (REE) near the non-stochastic steady state is shown to guarantee the existence, uniqueness and E-stability of an RPE local to that steady state. A benchmark RBC model with government spending shocks illustrates the theoretical results.

Keywords: Real business cycle model; adaptive learning; E-stability; restricted perceptions (search for similar items in EconPapers)
JEL-codes: D83 D84 E24 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:143:y:2022:i:c:s0165188922001968

DOI: 10.1016/j.jedc.2022.104492

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