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Discretionary Policy and Multiple Equilibria in LQ RE Models

  • Tatiana Kirsanova

    (University of Exeter)

  • Andrew P. Blake

    (Bank of England)

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.

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Paper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 789.

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Date of creation: 2010
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Handle: RePEc:red:sed010:789
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  21. 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.
  22. 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.
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