Indeterminacy in a forward-looking regime-switching model

Roger Farmer, Daniel Waggoner and Tao Zha

No 2006-19, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: This paper is about the properties of Markov-switching rational expectations (MSRE) models. We discuss possible solution concepts for MSRE models, distinguishing between stationary and bounded equilibria. For the case of models with one variable, we provide a necessary and sufficient condition for uniqueness of a bounded equilibrium, and we relate this condition to an alternative, the generalized Taylor principle suggested by Davig and Leeper. We provide examples of models with multiple bounded and multiple stationary equilibria which suggest that it may be more difficult to rule out nonfundamental equilibria in MSRE models than in the single-regime case where the Taylor principle is known to guarantee local uniqueness.

Date: 2007
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.frbatlanta.org/-/media/documents/resea ... /wp/2006/wp0619a.pdf (application/pdf)

Related works:
Journal Article: Indeterminacy in a forward‐looking regime switching model (2009)
Working Paper: Indeterminacy in a Forward Looking Regime Switching Model (2006)
Working Paper: Indeterminacy in a Forward Looking Regime Switching Model (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedawp:2006-19

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta Contact information at EDIRC.
Bibliographic data for series maintained by Rob Sarwark ().