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The long-run Taylor principle revisited

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  • Hayashi, Fumio

Abstract

There are two well-known conditions for the determinacy of equilibrium in MSRE (Markov-switching rational expectations) models. One is the long-run Taylor principle of Davig and Leeper (2007) and the other is by Farmer et al (2009). It is known that the former is merely a necessary condition. This note identifies a restriction on the solution under which the condition is sufficient as well as necessary.

Suggested Citation

  • Hayashi, Fumio, 2017. "The long-run Taylor principle revisited," Economics Letters, Elsevier, vol. 161(C), pages 24-26.
    • Handle: RePEc:eee:ecolet:v:161:y:2017:i:c:p:24-26
    DOI: 10.1016/j.econlet.2017.09.010
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    References listed on IDEAS

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    1. Troy Davig & Eric M. Leeper, 2010. "Generalizing the Taylor Principle: Reply," American Economic Review, American Economic Association, vol. 100(1), pages 618-624, March.
    2. Roger E. A. Farmer & Daniel F. Waggoner & Tao Zha, 2010. "Generalizing the Taylor Principle: Comment," American Economic Review, American Economic Association, vol. 100(1), pages 608-617, March.
    3. Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-1311, July.
    4. Klein, Paul, 2000. "Using the generalized Schur form to solve a multivariate linear rational expectations model," Journal of Economic Dynamics and Control, Elsevier, vol. 24(10), pages 1405-1423, September.
    5. Farmer, Roger E.A. & Waggoner, Daniel F. & Zha, Tao, 2009. "Understanding Markov-switching rational expectations models," Journal of Economic Theory, Elsevier, vol. 144(5), pages 1849-1867, September.
    6. Troy Davig & Eric M. Leeper, 2007. "Generalizing the Taylor Principle," American Economic Review, American Economic Association, vol. 97(3), pages 607-635, June.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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