Solving endogenous regime switching models

Jean Barthélemy and Magali Marx

Journal of Economic Dynamics and Control, 2017, vol. 77, issue C, 1-25

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.

Keywords: Regime switching; Rational expectations models; Indeterminacy; Perturbation methods (search for similar items in EconPapers)
JEL-codes: E32 E43 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39)

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Related works:
Working Paper: 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:eee:dyncon:v:77:y:2017:i:c:p:1-25

DOI: 10.1016/j.jedc.2017.01.011

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