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This paper develops a theory of regular Markov perfect equilibria in dynamic stochastic games. We show that almost all … dynamic stochastic games have a finite number of locally isolated Markov perfect equilibria that are all regular. These …
Persistent link: https://www.econbiz.de/10005497794
Forward-looking RE models such as the popular New Keynesian (NK) model do not provide a unique prediction about how the model economy behaves. We need some mechanism that ensures determinacy. McCallum (2011) says it is not needed because models are learnable only with the determinate solution...
Persistent link: https://www.econbiz.de/10011083805
We study the competitive equilibrium of a market for votes where voters can trade votes for a numeraire before making a decision via majority rule. The choice is binary and the number of supporters of either alternative is known. We identify a sufficient condition guaranteeing the existence of...
Persistent link: https://www.econbiz.de/10011084259
The paper proposes a model of on-the-job search and industry dynamics in which search is directed. Firms permanently differ in productivity levels, their production function features constant returns to scale, and search costs are convex in search intensity. Wages are determined in a competitive...
Persistent link: https://www.econbiz.de/10011084581
In aggregative games, each player's payoff depends on her own actions and an aggregate of the actions of all the … players (for example, sum, product or some moment of the distribution of actions). Many common games in industrial … organization, political economy, public economics, and macroeconomics can be cast as aggregative games. In most of these situations …
Persistent link: https://www.econbiz.de/10005067446
This Paper develops a model with multiple steady states (low tax and low unemployment versus high tax and high unemployment) in which equilibrium selection is not conditioned on a sunspot variable. Instead, large temporary shocks initiate unavoidable transitions from one steady state to another....
Persistent link: https://www.econbiz.de/10005656314
Rational expectations are often used as a strong argument against policy activism, as they may undermine or neutralize the policymaker’s actions. Although this sometimes happens, rational expectations do not always imply policy invariance or ineffectiveness. In fact, in certain circumstances...
Persistent link: https://www.econbiz.de/10005661866
A number of authors have attempted to test whether the US economy is in a determinate or an indeterminate equilibrium. We argue that to answer this question, one must impose a priori restrictions on lag length that cannot be tested. We provide examples of two economic models. Model 1 displays an...
Persistent link: https://www.econbiz.de/10005666730