Advanced Search
MyIDEAS: Login

On the Relationship Between Determinate and MSV Solutions in Linear RE Models

Contents:

Author Info

  • Bennett McCallum

Abstract

This paper considers the possibility that, in linear rational expectations (RE) models, all determinate (uniquely non-explosive) solutions coincide with the minimum state variable (MSV) solution, which is unique by construction. In univariate specifications of the form yt = AEtyt+1 + Cyt-1 + ut that result holds: if a RE solution is unique and non-explosive, then it is the same as the MSV solution. Also, this result holds for multivariate versions if the A and C matrices commute and a certain regularity condition holds. More generally, however, there are models of this form that possess unique non-explosive solutions that differ from their MSV solutions. Examples are provided and a strategy for easily constructing others is outlined.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: https://student-3k.tepper.cmu.edu/gsiadoc/wp/2003-E78.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Carnegie Mellon University, Tepper School of Business in its series GSIA Working Papers with number 2003-E78.

as in new window
Length:
Date of creation:
Date of revision:
Handle: RePEc:cmu:gsiawp:1362627550

Contact details of provider:
Postal: Tepper School of Business, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, PA 15213-3890
Web page: http://www.tepper.cmu.edu/

Order Information:
Web: http://student-3k.tepper.cmu.edu/gsiadoc/GSIA_WP.asp

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. G. Desgranges & Stéphane Gauthier, 2003. "Uniqueness of bubble-free solution in linear rational expectations models," Post-Print halshs-00069498, HAL.
  2. Gauthier, S., 1999. "Determinacy and Stability Under Learning of Rational Expectations Equilibria," G.R.E.Q.A.M. 99a46, Universite Aix-Marseille III.
  3. Gauthier, St phane, 2003. "Dynamic Equivalence Principle In Linear Rational Expectations Models," Macroeconomic Dynamics, Cambridge University Press, vol. 7(01), pages 63-88, February.
  4. Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-11, July.
  5. Jon Faust & Lars E. O. Svensson, 1998. "Transparency and Credibility: Monetary Policy with Unobservable Goals," NBER Working Papers 6452, National Bureau of Economic Research, Inc.
  6. McCallum, Bennett T., 1998. "Solutions to linear rational expectations models: a compact exposition," Economics Letters, Elsevier, vol. 61(2), pages 143-147, November.
  7. Uhlig, H., 1995. "A toolkit for analyzing nonlinear dynamic stochastic models easily," Discussion Paper 1995-97, Tilburg University, Center for Economic Research.
  8. repec:cup:macdyn:v:7:y:2003:i:2:p:171-91 is not listed on IDEAS
  9. Evans, George W., 1986. "Selection criteria for models with non-uniqueness," Journal of Monetary Economics, Elsevier, vol. 18(2), pages 147-157, September.
  10. Bennett McCallum, 1999. "Role of the Minimal State Variable Criterion in Rational Expectations Models," International Tax and Public Finance, Springer, vol. 6(4), pages 621-639, November.
  11. James Bullard & Kaushik Mitra, 2002. "Learning about monetary policy rules," Working Papers 2000-001, Federal Reserve Bank of St. Louis.
  12. McCallum, Bennett T., 1983. "On non-uniqueness in rational expectations models : An attempt at perspective," Journal of Monetary Economics, Elsevier, vol. 11(2), pages 139-168.
  13. Binder,M. & Pesaran,H.M., 1995. "Multivariate Rational Expectations Models and Macroeconomic Modelling: A Review and Some New Results," Cambridge Working Papers in Economics 9415, Faculty of Economics, University of Cambridge.
  14. Leitemo, Kai, 2003. " Targeting Inflation by Constant-Interest-Rate Forecasts," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(4), pages 609-26, August.
  15. Barro, Robert J., 1989. "Interest-rate targeting," Journal of Monetary Economics, Elsevier, vol. 23(1), pages 3-30, January.
  16. King, Robert G & Watson, Mark W, 1998. "The Solution of Singular Linear Difference Systems under Rational Expectations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 1015-26, November.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Schabert, Andreas, 2005. "Money supply and the implementation of interest rate targets," Working Paper Series 0483, European Central Bank.
  2. Miguel Casares & Antonio Moreno & Jesús Vázquez, 2009. "Wage Stickiness and Unemployment Fluctuations: An Alternative Approach," Faculty Working Papers 04/09, School of Economics and Business Administration, University of Navarra.
  3. Schabert, Andreas, 2005. "Discretionary policy, multiple equilibria, and monetary instruments," Working Paper Series 0533, European Central Bank.
  4. Troy Davig & Eric M. Leeper, 2005. "Generalizing the Taylor principle," Research Working Paper RWP 05-13, Federal Reserve Bank of Kansas City.
  5. Takeshi Kimura & Takushi Kurozumi, 2003. "Optimal monetary policy in a micro-founded model with parameter uncertainty," Finance and Economics Discussion Series 2003-67, Board of Governors of the Federal Reserve System (U.S.).
  6. McCallum, Bennett T., 2007. "E-stability vis-a-vis determinacy results for a broad class of linear rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 31(4), pages 1376-1391, April.
  7. Bennett T. Mccallum, 2011. "Causality, Structure And The Uniqueness Of Rational Expectations Equilibria," Manchester School, University of Manchester, vol. 79(s1), pages 551-566, 06.
  8. Berardi, Michele, 2007. "Heterogeneity and misspecifications in learning," Journal of Economic Dynamics and Control, Elsevier, vol. 31(10), pages 3203-3227, October.
  9. Cho, Seonghoon & Moreno, Antonio, 2011. "The forward method as a solution refinement in rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 35(3), pages 257-272, March.
  10. Bennett T. McCallum, 2008. "Determinacy, Learnability, and Plausibility in Monetary Policy Analysis: Additional Results," NBER Working Papers 14164, National Bureau of Economic Research, Inc.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cmu:gsiawp:1362627550. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Steve Spear).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.