Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5098066 | Journal of Economic Dynamics and Control | 2017 | 39 Pages |
Abstract
This paper solves rational expectations models in which structural parameters switch across multiple regimes according to state-dependent (endogenous) transition probabilities. Assuming small shocks and smooth transition probabilities, we apply a perturbation approach. We first provide for conditions under which a unique bounded equilibrium exists. We then compute first- and second-order approximations. In a new-Keynesian model with monetary policy switching, we document new effects of monetary policy switching when transition probabilities depend on inflation.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Jean Barthélemy, Magali Marx,