On the Indeterminacy of Determinacy and Indeterminacy
Abstract
A number of authors have attempted to test whether the US economy is in a determinate or an indeterminate equilibrium. We argue that to answer this question, one must impose a priori restrictions on lag length that cannot be tested. We provide examples of two economic models. Model 1 displays an indeterminate equilibrium, driven by sunspots. Model 2 displays a determinate equilibrium driven by fundamentals. Both models have the same likelihood function and are therefore observationally equivalent.Download Info
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Bibliographic Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4101.Length:
Date of creation: Oct 2003
Date of revision:
Handle: RePEc:cpr:ceprdp:4101
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Related research
Keywords: identification; indeterminacy;Other versions of this item:
- Andreas Beyer & Roger E.A. Farmer, 2003. "On the indeterminacy of determinacy and indeterminacy," Working Paper Series 277, European Central Bank.
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
- D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-02-29 (All new papers)
- NEP-MAC-2004-02-29 (Macroeconomics)
References
References listed on IDEASPlease 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.:
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Nicoletta Batini & Alejandro Justiniano & Paul Levine & Joseph Pearlman, 2004.
"Robust Inflation-Forecast-Based Rules to Shield against Indeterminacy,"
School of Economics Discussion Papers
0804, School of Economics, University of Surrey.
- Batini, Nicoletta & Justiniano, Alejandro & Levine, Paul & Pearlman, Joseph, 2006. "Robust inflation-forecast-based rules to shield against indeterminacy," Journal of Economic Dynamics and Control, Elsevier, vol. 30(9-10), pages 1491-1526.
- Weder, Mark, 2003.
"A Heliocentric Journey into Germany´s Great Depression,"
SFB 373 Discussion Papers
2003,50, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Mark Weder, 2006. "A heliocentric journey into Germany's Great Depression," Oxford Economic Papers, Oxford University Press, vol. 58(2), pages 288-316, April.
- Weder, Mark, 2004. "A Heliocentric Journey into Germany's Great Depression," CEPR Discussion Papers 4191, C.E.P.R. Discussion Papers.
- Mark Weder, 2005. "A Heliocentric Journey into Germany's Great Depression," Economic History 0510002, EconWPA.
- Mark Weder, 2005. "A Heliocentric Journey into Germany's Great Depression," School of Economics Working Papers 2005-13, University of Adelaide, School of Economics.
- Mark Weder, 2004. "A Heliocentric Journey into Germany's Great Depression," Money Macro and Finance (MMF) Research Group Conference 2004 53, Money Macro and Finance Research Group.
- Andreas Beyer & Roger E. A. Farmer, 2006. "A method to generate structural impulse-responses for measuring the effects of shocks in structural macro models," Working Paper Series 586, European Central Bank.
- John H. Cochrane, 2007.
"Determinacy and Identification with Taylor Rules,"
NBER Working Papers
13409, National Bureau of Economic Research, Inc.
- John H. Cochrane, 2011. "Determinacy and Identification with Taylor Rules," Journal of Political Economy, University of Chicago Press, vol. 119(3), pages 565 - 615.
- John H. Cochrane, 2007. "Determinacy and Identification with Taylor Rules," NBER Working Papers 13410, National Bureau of Economic Research, Inc.
- Jagjit Chadha & Luisa Corrado, 2006. "Sunspots and Monetary Policy," Economics and Finance Discussion Papers 06-06, Economics and Finance Section, School of Social Sciences, Brunel University.
- Carrillo, Julio & Fève, Patrick, 2004. "Some Perils of Policy Rule Regression," IDEI Working Papers 301, Institut d'Économie Industrielle (IDEI), Toulouse.
- Castelnuovo, Efrem & Greco, Luciano & Raggi, Davide, 2008. "Estimating regime-switching Taylor rules with trend inflation," Research Discussion Papers 20/2008, Bank of Finland.
- Timothy Cogley & Giorgio E. Primiceri & Thomas J. Sargent, 2008.
"Inflation-Gap Persistence in the U.S,"
NBER Working Papers
13749, National Bureau of Economic Research, Inc.
- Timothy Cogley & Giorgio E. Primiceri & Thomas J. Sargent, 2010. "Inflation-Gap Persistence in the US," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 43-69, January.
- Ascari, Guido & Rankin, Neil, 2007.
"Perpetual youth and endogenous labor supply: A problem and a possible solution,"
Journal of Macroeconomics,
Elsevier, vol. 29(4), pages 708-723, December.
- Guido Ascari & Neil Rankin, 2004. "Perpetual youth and endogenous labour supply: a problem and a possible solution," Working Paper Series 346, European Central Bank.
- Chadha, J.S. & Corrado, L., 2007.
"On the Determinacy of Monetary Policy under Expectational Errors,"
Cambridge Working Papers in Economics
0722, Faculty of Economics, University of Cambridge.
- Jagjit S. Chadha & Luisa Corrado, 2006. " On the Determinacy of Monetary Policy under Expectational Errors," CDMA Working Paper Series 0603, Centre for Dynamic Macroeconomic Analysis, revised Apr 2007.
- Fève, Patrick, 2004. "Indeterminacy Produces Determinacy," IDEI Working Papers 333, Institut d'Économie Industrielle (IDEI), Toulouse.
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