Is There More than One Way to be E-Stable?

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Is There More than One Way to be E-Stable?

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Joseph Pearlman ()

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Joseph Gerson Pearlman

Abstract

We initially examine two different methods for learning about parameters in a Rational Expectations setting, and show that there are conflicting E-stability results. We show that this conflict also extends to Minimum State Variable (MSV) representations. One of these methods of learning lends itself to the examination of E-stability for the generic forward-looking rational expectations model. This leads to a completely general relationship between saddlepath stability and E-stability, and a generalization of MSV results.

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Paper provided by Centre for Dynamic Macroeconomic Analysis in its series CDMA Working Paper Series with number 0701.

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Date of creation: Jan 2007
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Handle: RePEc:san:cdmawp:0701

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Find related papers by JEL classification:
C6 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming
E00 - Macroeconomics and Monetary Economics - - General - - - General

This paper has been announced in the following NEP Reports:

NEP-ALL-2007-01-13 (All new papers)
NEP-CBA-2007-01-13 (Central Banking)
NEP-MAC-2007-01-13 (Macroeconomics)

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Svensson, Lars E. O., 2000. "Open-economy inflation targeting," Journal of International Economics, Elsevier, vol. 50(1), pages 155-183, February. [Downloadable!] (restricted)
Other versions:
- Lars E. O. Svensson, 2000. "Open-Economy Inflation Targeting," NBER Working Papers 6545, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
- Svensson, L.E.O., 1998. "Open-Economy Inflation Targeting," Papers 638, Stockholm - International Economic Studies.
- Svensson, Lars E.O., 1998. "Open-Economy Inflation Targeting," Seminar Papers 638, Stockholm University, Institute for International Economic Studies. [Downloadable!]
- Svensson, Lars E O, 1998. "Open-Economy Inflation Targeting," CEPR Discussion Papers 1989, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Bennett T. McCallum, 2006. "E-Stability vis-a-vis Determinacy Results for a Broad Class of Linear Rational Expectations Models," NBER Working Papers 12441, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- 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. [Downloadable!] (restricted)
Evans, George W & Honkapohja, Seppo, 2002. "Monetary Policy, Expectations and Commitment," CEPR Discussion Papers 3434, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Other versions:
- George W. Evans & Seppo Honkapohja, 2002. "Monetary Policy, Expectations and Commitment," University of Oregon Economics Department Working Papers 2005-11, University of Oregon Economics Department, revised 06 Apr 2005. [Downloadable!]
- George W. Evans & Seppo Honkapohja, 2002. "Monetary policy; expectations and commitment," Working Paper Series 124, European Central Bank. [Downloadable!]
- George W. Evans & Seppo Honkapohja, 2002. "Monetary Policy, Expectations and Commitment," University of Oregon Economics Department Working Papers 2002-11, University of Oregon Economics Department, revised 01 Feb 2004. [Downloadable!]
- George W. Evans & Seppo Honkapohja, 2006. "Monetary Policy, Expectations and Commitment," Scandinavian Journal of Economics, Blackwell Publishing, vol. 108(1), pages 15-38, 03. [Downloadable!] (restricted)
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. [Downloadable!] (restricted)
Bennett T. McCallum, 2003. "The Unique Minimum State Variable RE Solution is E-Stable in All Well Formulated Linear Models," NBER Working Papers 9960, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Bennett T. McCallum, 2002. "The Unique Minimum State Variable RE Soluiton is E-Stable in All Well Formulated Linear Models," GSIA Working Papers 2003-25, Carnegie Mellon University, Tepper School of Business.

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