A unified approach to determinacy conditions with regime switching

Jean Barthélemy, Seonghoon Cho, Magali Marx

Research output: Contribution to journalArticlepeer-review

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 languageEnglish
Article number101240
JournalReview of Economic Dynamics
Volume54
DOIs
Publication statusPublished - 2024 Oct

Bibliographical note

Publisher Copyright:
© 2024 Elsevier Inc.

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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