On the Solution of Markov-switching Rational Expectations Models

Arbeitspapier

This paper describes a method for solving a class of forward-looking Markov-switching Rational Expectations models under noisy measurement, by specifying the unobservable expectations component as a general-measurable function of the observable states of the system, to be determined optimally via stochastic control and filtering theory. Solution existence is proved by setting this function to the regime-dependent feedback control minimizing the mean-square deviation of the equilibrium path from the corresponding perfect-foresight autoregressive Markov jump state motion. As the exact expression of the conditional (rational) expectations term is derived both in finite and infinite horizon model formulations, no (asymptotic) stationarity assumptions are needed to solve forward the system, for only initial values knowledge is required. A simple sufficient condition for the mean-square stability of the obtained rational expectations equilibrium is also provided.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Bonn Econ Discussion Papers ; No. 05/2011

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Optimization Techniques; Programming Models; Dynamic Analysis ; Existence and Stability Conditions of Equilibrium ; Computational Techniques; Simulation Modeling
• Thema: Rational Expectations ; Markov-switching dynamic systems ; Dynamic programming ; Time-varying Kalman filter ; Rationale Erwartung ; Dynamisches Modell ; Gleichgewicht ; Markovscher Prozess ; Dynamische Optimierung ; Zustandsraummodell ; Theorie

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Carravetta, Francesco ; Sorge, Marco M.
• Ereignis: Veröffentlichung
• (wer): University of Bonn, Bonn Graduate School of Economics (BGSE)
• (wo): Bonn
• (wann): 2011

Weitere Informationen

• Handle: http://hdl.handle.net/10419/71901
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ