Role of the minimal state variable criterion in rational expectations models
AbstractThis paper concerns the minimal-state-variable (MSV) criterion for selection among solutions in rational expectationsmodels that feature a multiplicity of paths that satisfy all of the model's conditions. It compares the MSVcriterion with others, including the widely used saddle-path (dynamic stability) criterion. It is emphasized that theMSV criterion can be viewed as a scientifically useful classification scheme that delineates the unique solutionthat is free of bubble components. In the process of demonstrating uniqueness for a broad class of linear models,the paper exposits a convenient computational procedure. Applications to current issues are outlined. Copyright Kluwer Academic Publishers 1999
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Bibliographic InfoPaper provided by Carnegie Mellon University, Tepper School of Business in its series GSIA Working Papers with number 1999-13.
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Postal: Tepper School of Business, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, PA 15213-3890
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Other versions of this item:
- 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.
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