IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Discretionary Policy and Multiple Equilibria in LQ RE Models

  • Blake, Andrew P.
  • Kirsanova, Tatiana

We study discretionary equilibria in dynamic linear-quadratic rational expectations models. In contrast to the assumptions that pervade this literature we show that these models do have multiple equilibria in some situations. We demonstrate the existence of multiple discretionary equilibria by example. We investigate general properties of discretionary equilibria and discuss implications for numerical algorithms.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: original version
Download Restriction: no

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 21901.

in new window

Date of creation: 09 Nov 2006
Date of revision: 01 Apr 2010
Handle: RePEc:pra:mprapa:21901
Contact details of provider: Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page:

More information through EDIRC

References listed on IDEAS
Please 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.:

as in new window
  1. Troy Davig & Eric M. Leeper, 2005. "Fluctuating Macro Policies and the Fiscal Theory," NBER Working Papers 11212, National Bureau of Economic Research, Inc.
  2. Honkapohja, S. & Evans, G.W., 2000. "Expectations and the Stability Problem for Optimal Monetary Policies," University of Helsinki, Department of Economics 481, Department of Economics.
  3. repec:oup:qjecon:v:103:y:1988:i:3:p:441-63 is not listed on IDEAS
  4. Richard Clarida & Jordi Galí & Mark Gertler, 1997. "The science of monetary policy: A new Keynesian perspective," Economics Working Papers 356, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 1999.
  5. Stephanie Schmitt-Grohe & Martin Uribe, 2004. "Optimal Simple and Implementable Monetary and Fiscal Rules," NBER Working Papers 10253, National Bureau of Economic Research, Inc.
  6. Stefania Albanesi & V. V. Chari & Lawrence J. Christiano, 2003. "Expectation traps and monetary policy," Staff Report 319, Federal Reserve Bank of Minneapolis.
  7. Woodford, Michael, 2005. "Firm-Specific Capital and the New Keynesian Phillips Curve," MPRA Paper 825, University Library of Munich, Germany.
  8. repec:oup:qjecon:v:119:y:2004:i:4:p:1513-1553 is not listed on IDEAS
  9. Clarida, Richard & Sarno, Lucio & Taylor, Mark P & Valente, Giorgio, 2002. "The Out-of-Sample Success of Term Structure Models as Exchange Rate Predictors: A Step Beyond," CEPR Discussion Papers 3281, C.E.P.R. Discussion Papers.
  10. Michael Woodford, 2001. "Fiscal Requirements for Price Stability," NBER Working Papers 8072, National Bureau of Economic Research, Inc.
  11. Carl Walsh, 2001. "Speed Limit Policies: The Output Gap and Optimal Monetary Policy," CESifo Working Paper Series 609, CESifo Group Munich.
  12. Robert G. King & Alexander L. Wolman, 2004. "Monetary discretion, pricing complementarity, and dynamic multiple equilibria," Working Paper 04-05, Federal Reserve Bank of Richmond.
  13. Lars Peter Hansen & Ellen R. McGrattan & Thomas J. Sargent, 1994. "Mechanics of forming and estimating dynamic linear economies," Staff Report 182, Federal Reserve Bank of Minneapolis.
  14. Currie,David & Levine,Paul, 2009. "Rules, Reputation and Macroeconomic Policy Coordination," Cambridge Books, Cambridge University Press, number 9780521104609.
  15. Carlo Favero & Tommaso Monacelli, 2005. "Fiscal Policy Rules and Regime (In)Stability: Evidence from the U.S," Working Papers 282, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  16. Troy Davig & Eric M. Leeper, 2006. "Endogenous Monetary Policy Regime Change," Caepr Working Papers 2006-002, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  17. Andrew P. Blake, 2004. "Analytic Derivatives for Linear Rational Expectations Models," Computational Economics, Society for Computational Economics, vol. 24(1), pages 77-96, 08.
  18. Vestin, David, 2006. "Price-level versus inflation targeting," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1361-1376, October.
  19. Gilles Oudiz & Jeffrey Sachs, 1985. "International Policy Coordination in Dynamic Macroeconomic Models," NBER Chapters, in: International Economic Policy Coordination, pages 274-330 National Bureau of Economic Research, Inc.
  20. Leeper, Eric M., 1991. "Equilibria under 'active' and 'passive' monetary and fiscal policies," Journal of Monetary Economics, Elsevier, vol. 27(1), pages 129-147, February.
  21. Backus, David & Driffill, John, 1986. "The Consistency of Optimal Policy in Stochastic Rational Expectations Models," CEPR Discussion Papers 124, C.E.P.R. Discussion Papers.
  22. repec:oup:restud:v:55:y:1988:i:2:p:263-74 is not listed on IDEAS
  23. Söderlind, Paul, 1998. "Solution and Estimation of RE Macromodels with Optimal Policy," SSE/EFI Working Paper Series in Economics and Finance 256, Stockholm School of Economics.
  24. Engel, Charles & Hamilton, James D, 1990. "Long Swings in the Dollar: Are They in the Data and Do Markets Know It?," American Economic Review, American Economic Association, vol. 80(4), pages 689-713, September.
  25. 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.
  26. Vives, Xavier, 2004. "Complementarities and Games: New Developments," CEPR Discussion Papers 4742, C.E.P.R. Discussion Papers.
  27. Sveen, Tommy & Weinke, Lutz, 2005. "New perspectives on capital, sticky prices, and the Taylor principle," Journal of Economic Theory, Elsevier, vol. 123(1), pages 21-39, July.
  28. Hans M. Amman & David A. Kendrick, . "Computational Economics," Online economics textbooks, SUNY-Oswego, Department of Economics, number comp1.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:21901. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.