Abstract
The conditions that ensure the existence of a unique stable equilibrium — determinacy conditions — for rational expectations models with Markov switching depend on the stability concept, contrasting with standard linear rational expectations models. In this paper, we offer a unified framework for the two commonly used stability concepts: boundedness and mean-square stability. We derive determinacy conditions for both concepts based on simple metrics. Qualitatively, we show that mean-square stable solutions are always at least as many as bounded solutions. We then apply and discuss our results in two monetary models.
Original language | English |
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Article number | 101240 |
Journal | Review of Economic Dynamics |
Volume | 54 |
DOIs | |
Publication status | Published - 2024 Oct |
Bibliographical note
Publisher Copyright:© 2024 Elsevier Inc.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics