Solving Endogenous Regime Switching Models

Jean Barthélemy and Magali Marx

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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)
Date: 2016-11-01
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03393181
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Related works:
Journal Article: Solving endogenous regime switching models (2017)
Working Paper: Solving Endogenous Regime Switching Models (2017)
Working Paper: Solving Endogenous Regime Switching Models (2017)
Working Paper: Solving Endogenous Regime Switching Models (2016)
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