Does a Unique Solution Exist for a Nonlinear Rational Expectation Equation with Zero Lower Bound?

Takashi Tamura ()
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Takashi Tamura: Osaka Prefecture University

Asia-Pacific Financial Markets, 2020, vol. 27, issue 2, No 6, 257-289

Abstract: Abstract To formalize a nonlinear rational expectation model in macroeconomics as a functional equation, we investigate the existence of a unique solution. Assuming that the probability of large exogenous disturbance occurring is sufficiently small, we prove that a unique solution exists. This result provides a rigorous foundation for research on nonlinear rational expectation models as a natural extension of existing linear models.

Keywords: Nonlinear rational expectation model; Functional equation; Zero lower bound on interest rates; Lyapunov functions (search for similar items in EconPapers)
JEL-codes: E50 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s10690-019-09293-1

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