NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Understanding Markov-Switching Rational Expectations Models

Roger E.A. Farmer, Tao Zha, Daniel F. Waggoner

NBER Working Paper No. 14710
Issued in February 2009
NBER Program(s):   EFG   ME

We develop a set of necessary and sufficient conditions for equilibria to be determinate in a class of forward-looking Markov-switching rational expectations models and we develop an algorithm to check these conditions in practice. We use three examples, based on the new-Keynesian model of monetary policy, to illustrate our technique. Our work connects applied econometric models of Markov-switching with forward looking rational expectations models and allows an applied researcher to construct the likelihood function for models in this class over a parameter space that includes a determinate region and an indeterminate region.

download in pdf format
   (713 K)

email paper

This paper is available as PDF (713 K) or via email.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w14710

Published: Farmer, Roger E.A. & Waggoner, Daniel F. & Zha, Tao, 2009. "Understanding Markov-switching rational expectations models," Journal of Economic Theory, Elsevier, vol. 144(5), pages 1849-1867, September.

Users who downloaded this paper also downloaded these:
Shen w12374 The Effects of HMO and Its For-Profit Expansion on the Survival of Specialized Hospital Services
Atack, Haines, and Margo w14410 Railroads and the Rise of the Factory: Evidence for the United States, 1850-70
Fraumeni w14736 The Contribution of Highways to GDP Growth
Lampe and Moser w15061 Do Patent Pools Encourage Innovation? Evidence from the 19th-Century Sewing Machine Industry
McArdle, Smith, and Willis w15266 Cognition and Economic Outcomes in the Health and Retirement Survey
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us