A Unified Approach to Determinacy Conditions with Regime Switching

Jean Barthélemy, Seonghoon Cho and Magali Marx
Authors registered in the RePEc Author Service: Jean Barthélemy

Working papers from Banque de France

Abstract: The conditions that ensure the existence of a unique stable equilibrium - determinacy conditions - for rational expectations models with Markov switching depend on the stability concept, contrasting with standard linear rational expectations models. In this paper, we offer a unified framework for the two commonly used stability concepts: boundedness and mean-square stability. We derive determinacy conditions for both concepts based on simple metrics. Qualitatively, we show that mean-square stable solutions are always at least as many as bounded solutions. We then apply and discuss our results in two monetary models.

Keywords: Markov-Switching; Indeterminacy; Monetary Policy (search for similar items in EconPapers)
JEL-codes: E31 E43 E52 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2024
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Journal Article: A Unified Approach to Determinacy Conditions with Regime Switching (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:972

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