Showing 1 - 10 of 224
This paper proposes forward convergence as a model refinement scheme for linear rational expectations (LRE) models and an associated no-bubble condition as a solution selection criterion. We relate these two concepts to determinacy and characterize the complete set of economically relevant...
Persistent link: https://www.econbiz.de/10010821907
This paper argues against determinacy as a guide to interpret rational expectations solutions, using an example in which a determinate solution exists but differs sharply in dynamic behavior from that implied by the model considered on a sector-by-sector basis.
Persistent link: https://www.econbiz.de/10005023474
Markov-switching rational expectations (MSRE) models can bring out fresh insights beyond what linear rational expectations models have done for macroeconomics, as noted and predicted by Davig and Leeper (2007) and Farmer, Waggoner and Zha (2009), among others. However, a lack of tractable...
Persistent link: https://www.econbiz.de/10011262704
We estimate a New-Keynesian macro model accommodating regime-switching behavior in monetary policy and in macro shocks. Key to our estimation strategy is the use of survey-based expectations for inflation and output. We identify accommodating monetary policy before 1980, with activist monetary...
Persistent link: https://www.econbiz.de/10011081317
Under reduced-form learning, agents are endowed with an aggregate model, and rational expectations are then replaced with subjective expectations. This paper demonstrates that the reduced-form learning approach may be arbitrary in that a particular representation of aggregate dynamics has...
Persistent link: https://www.econbiz.de/10011208459
A New-Keynesian macro-model is estimated accommodating regime-switching behavior in monetary policy and macro-shocks. A key to our estimation strategy is the use of survey-based expectations for inflation and output. Output and inflation shocks shift to the low volatility regime around 1985 and...
Persistent link: https://www.econbiz.de/10011208562
Online appendix for the Review of Economic Dynamics article
Persistent link: https://www.econbiz.de/10011189145
This article contributes to the Permanent Income Hypothesis (PIH) and excess consumption smoothness debate in the context of fractional integration. We show that the excess consumption smoothness result is a consequence of the quarterly data frequency commonly employed in the empirical work. In...
Persistent link: https://www.econbiz.de/10010971194
Ellison and Pearlman (2011) show that determinacy implies e-stability under both full and lagged information if (1) subjective expectations are consistent with a structural model and unbiased, and (2) a learning process is given by the saddlepath relationship. This study clarifies that their...
Persistent link: https://www.econbiz.de/10011076541
This paper contributes to the permanent income hypothesis (PIH) and excess consumption smoothness debate in the context of fractional integration. We show that the excess consumption smoothness result is a consequence of the quarterly data frequency commonly employed in empirical work. In fact,...
Persistent link: https://www.econbiz.de/10004988900