This paper develops a methodology for approximating rational expectations models with Markov Switching. Specifically, we consider how to do both linear and higher-order approximations, including cases when each individual regime is associated with it's own steady state. We document the...

policy rules during Volckers tenure as Chairman of the Fed. At the same time, we document how good volatility shocks played an important role in the great performance of the economy during the 1990s.

volatility in the real interest rates faced by a sample of four emerging small open economies: Argentina, Ecuador, Venezuela, and Brazil. We postulate a stochastic volatility process for real interest rates using T-bill rates and country spreads and estimate it with the help of the Particle...