A Continuity Refinement for Rational Expectations Solutions
AbstractLinear RE models typically possess a multiplicity of solutions. Consider, however, the requirement that the solution coefficients must not be infinitely discontinuous in the model’s structural parameters. In particular, we require that the solutions should be continuous in the limit as those parameters, which express quantitatively the extent to which expectations affect endogenous variables, go to zero. The paper shows that under this condition there is, for a very broad class of linear RE models, only a single solution.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18323.
Date of creation: Aug 2012
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Find related papers by JEL classification:
- C00 - Mathematical and Quantitative Methods - - General - - - General
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-08-23 (All new papers)
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