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Refining linear rational expectations models and equilibria

Seonghoon Cho and Bennett McCallum
Authors registered in the RePEc Author Service: Seong-Hoon Cho ()

Journal of Macroeconomics, 2015, vol. 46, issue C, 160-169

Abstract: This paper develops the case for forward convergence as a model refinement scheme for linear rational expectations models and an associated no-bubble condition as a solution selection criterion. We relate these two concepts to determinacy and characterize the complete set of economically relevant rational expectations solutions to the linear rational expectations models under determinacy and indeterminacy. Our results show (1) why a determinate solution is economically cogent in most, but not all, cases, and (2) that those models that are not forward-convergent have no economically relevant solutions.

Keywords: Determinacy; Forward convergence; No-bubble condition; Rational expectations (search for similar items in EconPapers)
JEL-codes: C6 D8 E3 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Refining Linear Rational Expectations Models and Equilibria (2012) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:46:y:2015:i:c:p:160-169

DOI: 10.1016/j.jmacro.2015.09.004

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