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Refining Linear Rational Expectations Models And Equilibria
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Book Synopsis Refining Linear Rational Expectations Models and Equilibria by : Seonghoon Cho
Download or read book Refining Linear Rational Expectations Models and Equilibria written by Seonghoon Cho and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper proposes forward convergence as a model refinement scheme for linear rational expectations (LRE) models and an associated no-bubble condition as a solution selection criterion. We relate these two concepts to determinacy and characterize the complete set of economically relevant rational expectations solutions to the LRE models under determinacy and indeterminacy. Our results show (1) why a determinate solution is economically meaningful in most, but not all, cases, and (2) that those models that are not forward-convergent have no economically relevant solutions.
Book Synopsis The Rational Expectations Equilibrium Inventory Model by : Tryphon Kollintzas
Download or read book The Rational Expectations Equilibrium Inventory Model written by Tryphon Kollintzas and published by Springer Science & Business Media. This book was released on 2013-03-08 with total page 278 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume consists of six essays that develop and/or apply "rational expectations equilibrium inventory models" to study the time series behavior of production, sales, prices, and inventories at the industry level. By "rational expectations equilibrium inventory model" I mean the extension of the inventory model of Holt, Modigliani, Muth, and Simon (1960) to account for: (i) discounting, (ii) infinite horizon planning, (iii) observed and unobserved by the "econometrician" stochastic shocks in the production, factor adjustment, storage, and backorders management processes of firms, as well as in the demand they face for their products; and (iv) rational expectations. As is well known according to the Holt et al. model firms hold inventories in order to: (a) smooth production, (b) smooth production changes, and (c) avoid stockouts. Following the work of Zabel (1972), Maccini (1976), Reagan (1982), and Reagan and Weitzman (1982), Blinder (1982) laid the foundations of the rational expectations equilibrium inventory model. To the three reasons for holding inventories in the model of Holt et al. was added (d) optimal pricing. Moreover, the popular "accelerator" or "partial adjustment" inventory behavior equation of Lovell (1961) received its microfoundations and thus overcame the "Lucas critique of econometric modelling.
Book Synopsis Rational Expectations Equilibrium with Linear Models by : Robert M. Anderson
Download or read book Rational Expectations Equilibrium with Linear Models written by Robert M. Anderson and published by . This book was released on 1981 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Forward Method as a Solution Refinement in Rational Expectations Models by : Seonghoon Cho
Download or read book The Forward Method as a Solution Refinement in Rational Expectations Models written by Seonghoon Cho and published by . This book was released on 2008 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper generalizes the standard forward method of recursive substitution to a general class of linear Rational Expectations models with potentially multiple fundamental solutions. We propose a key property embedded in the forward solution -- the no-bubble condition -- as an economically sensible solution refinement in the class of fundamental solutions. In the literature, the no-bubble condition has been assumed to rule out non-fundamental bubble solutions. However, since the condition involves expectations of the future endogenous variables, it must be verified for every Rational Expectations equilibrium. We show that the forward solution is the only fundamental solution satisfying the no-bubble condition and that it is hard to justify economically fundamental solutions violating this condition. We provide several economic examples where the fundamental solutions obtained by other solution methods and refined by other solution selection criteria violate the no-bubble condition.
Book Synopsis Reduced Forms of Rational Expectations Models by : L. Broze
Download or read book Reduced Forms of Rational Expectations Models written by L. Broze and published by Routledge. This book was released on 2013-06-17 with total page 134 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive exposition of rational expectations models is provided here, working up from simple univariate models to more sophisticated multivariate and non-linear models.
Book Synopsis Linear Rational Expectations Models by : Charles H. Whiteman
Download or read book Linear Rational Expectations Models written by Charles H. Whiteman and published by U of Minnesota Press. This book was released on 1984 with total page 151 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Assessing Rational Expectations 2 by : Roger Guesnerie
Download or read book Assessing Rational Expectations 2 written by Roger Guesnerie and published by MIT Press. This book was released on 2005-02-18 with total page 498 pages. Available in PDF, EPUB and Kindle. Book excerpt: A theoretical assessment of the Rational Expectations Hypothesis through subjecting a collection of economic models to an "eductive stability" test. The rational expectations hypothesis (REH) dominates economic modeling in areas ranging from monetary theory, macroeconomics, and general equilibrium to finance. In this book, Roger Guesnerie continues the critical analysis of the REH begun in his Assessing Rational Expectations: Sunspot Multiplicity and Economic Fluctuations, which dealt with the questions raised by multiplicity and its implications for a theory of endogenous fluctuations. This second volume emphasizes "eductive" learning: relying on careful reasoning, agents must deduce what other agents guess, a process that differs from the standard evolutionary learning experience in which agents make decisions about the future based on past experiences. A broad "eductive" stability test is proposed that includes common knowledge and results in a unique "rationalizable expectations equilibrium." This test provides the basis for Guesnerie's theoretical assessment of the plausibility of the REH's expectational coordination, emphasizing, for different categories of economic models, conditions for the REH's success or failure. Guesnerie begins by presenting the concepts and methods of the eductive stability analysis in selected partial equilibrium models. He then explores to what extent general equilibrium strategic complementarities interfere with partial equilibrium considerations in the formation of stable expectations. Guesnerie next examines two issues relating to eductive stability in financial market models, speculation and asymmetric price information. The dynamic settings of an infinite horizon model are then taken up, and particular standard and generalized saddle-path solutions are scrutinized. Guesnerie concludes with a review of general questions and some "cautious" remarks on the policy implications of his analysis.
Book Synopsis A Rational Expectations Equilibrium Model of the Cyclical Behavior of Employment and Inventories of Finished Goods by : Martin Stewart Eichenbaum
Download or read book A Rational Expectations Equilibrium Model of the Cyclical Behavior of Employment and Inventories of Finished Goods written by Martin Stewart Eichenbaum and published by . This book was released on 1981 with total page 338 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Expectational Stability in Regime-switching Rational Expectations Models by : William A. Branch
Download or read book Expectational Stability in Regime-switching Rational Expectations Models written by William A. Branch and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Regime-switching rational expectations models, in which the parameters of the model evolve according to a finite state Markov process, have properties that differentiate them from linear models. Issues that are well understood in linear contexts, such as equilibrium determinacy and stability under adaptive learning, re-emerge in this new context. This paper outlines these issues and defines two classes of equilibria that emerge from regime-switching models. The distinguishing feature between the two classes is whether the conditional density of the endogenous state variables depends on past regimes. An assumption on whether agents condition their expectations on past regimes has important implications for determinacy and equilibrium dynamics. The paper addresses the stability properties of the different classes of equilibria under adaptive learning, extending the learning literature to a non-linear framework.
Book Synopsis Rational Expectations Models with a Continuum of Convergent Solutions by : Michael Mussa
Download or read book Rational Expectations Models with a Continuum of Convergent Solutions written by Michael Mussa and published by . This book was released on 1984 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines five examples of rational expectations models with a continuum of convergent solutions and demonstrates serious difficulties in the economic interpretation of these solutions. The five examples are (1) a model of optimal capital accumulation with a negative rate of time preference, (2) Taylor's (1977) linear rational expectations model of macroeconomic equilibrium; (3) Calvo's (1984) model of contract setting and price dynamics; (4) Obstfeld's (1984) equilibrium model of monetary dynamics with individual optimizing agents; and (5) Calvo's (1978) life-cycle model of savings and asset valuation. In every case, when these models yield a continuum of convergent infinite horizon solutions, these solutions fail to exhibit economically appropriate, forward looking dependence of the endogenous variables on the paths of the exogenous forcing variab1es--a difficulty that does not arise under the circumstances where these models yield unique convergent infinite horizon solutions. Further, the three models that have natural finite horizon versions, either lack finite horizon solutions or have solutions that do not converge to any of the infinite horizon solutions. Again, this difficulty arises only under the circumstances where these models have a continuum of infinite horizon solutions.
Book Synopsis Expectational Stability in Regime-Switching Rational Expectations Models by : William Branch
Download or read book Expectational Stability in Regime-Switching Rational Expectations Models written by William Branch and published by . This book was released on 2013 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: Regime-switching rational expectations models, in which the parameters of the model evolve according to a amp;finite state Markov process, have properties that differentiate them from linear models. Issues that are well understood in linear contexts, such as equilibrium determinacy and stability under adaptive learning, re-emerge in this new context. This paper outlines these issues and deamp;fines two classes of equilibria that emerge from regime-switching models. The distinguishing feature between the two classes is whether the conditional density of the endogenous state variables depends on past regimes. An assumption on whether agents condition their expectations on past regimes has important implications for determinacy and equilibrium dynamics. The paper addresses the stability properties of the different classes of equilibria under adaptive learning, extending the learning literature to a non-linear framework.
Book Synopsis A Rational Expectations Equilibrium Model of Technical Change by : Paul Francis O'Brien
Download or read book A Rational Expectations Equilibrium Model of Technical Change written by Paul Francis O'Brien and published by . This book was released on 1986 with total page 192 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis A Finite Set of Equilibria for the Indeterminacy of Linear Rational Expectations Models by : Jean-Bernard Chatelain
Download or read book A Finite Set of Equilibria for the Indeterminacy of Linear Rational Expectations Models written by Jean-Bernard Chatelain and published by . This book was released on 2014 with total page 7 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper demonstrates the existence of a finite set of equilibria in the case of the indeterminacy of linear rational expectations models. The number of equilibria corresponds to the number of ways to select n eigenvectors among a larger set of eigenvectors related to stable eigenvalues. A finite set of equilibria is a substitute to continuous (uncountable) sets of sunspots equilibria, when the number of independent eigenvectors for each stable eigenvalue is equal to one.
Book Synopsis Economically Sensible Solutions for Linear Rational Expectations Models with Forward and Backward Looking Dynamic Processes by : Michael Mussa
Download or read book Economically Sensible Solutions for Linear Rational Expectations Models with Forward and Backward Looking Dynamic Processes written by Michael Mussa and published by . This book was released on 1984 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using variants of a modified version of Dornbusch's model of price level and exchange rate dynamics, it is demonstrated that satisfaction of the formal condition for existence of a unigue non-explosive solution of a linear rational expectations model with forward and backward looking dynamic processes (equality of the number of stable roots with the number of independent backward looking processes) does not guarantee the economic sensibility of this solution, even if one accepts the usual arguments for excluding "speculative babbles" from the solutions of such models. Moreover, satisfaction of the formal condition for existence of an infinity of non-explosive solutions for such rational expectations models (more stable roots than independent backward looking processes) does not assure that any of these solutions is economically sensible.
Book Synopsis Approximate Equilibria in Microeconomic Rational Expectations Models by : Beth Allen
Download or read book Approximate Equilibria in Microeconomic Rational Expectations Models written by Beth Allen and published by . This book was released on 1981 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Estimation and Learning in Models of Rational Expectations by : Mark David Feldman
Download or read book Estimation and Learning in Models of Rational Expectations written by Mark David Feldman and published by . This book was released on 1982 with total page 142 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Causality, Structure, and the Uniqueness of Rational Expectations Equilibria by : Bennett T. McCallum
Download or read book Causality, Structure, and the Uniqueness of Rational Expectations Equilibria written by Bennett T. McCallum and published by . This book was released on 2009 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: Consider a rational expectations (RE) model that includes a relationship between variables xt and zt+1. To be considered structural and potentially useful as a guide to actual behavior, this model must specify whether xt is influenced by the expectation at t of zt+1 or, alternatively, that zt+1 is directly influenced (via some inertial mechanism) by xt (i.e., that zt is influenced by xt-1). These are quite different phenomena. Here it is shown that, for a very broad class of multivariate linear RE models, distinct causal specifications involving both expectational and inertial influences will be uniquely associated with distinct solutionsâ?"which will result operationally from different specifications concerning which of the model's variables are predetermined. It follows that for a given structure, and with a natural continuity assumption, there is only one RE solution that is fully consistent with the model's specification. Furthermore, this solution does not involve â??sunspotâ?? phenomena
