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- Title
Optimal monetary policy in Markov-switching models with rational expectations agents.
- Authors
Blake, Andrew P.; Zampolli, Fabrizio
- Abstract
The paper focuses on the way the economy works might change over time in an unanticipated manner which would not be captured by normal economic models. It considers an economy in which the transition mechanism can be change over time in an uncertain manner. The paper's main contribution is the development of simple methods for working out the best interest rate response to shocks in an evolving economy. The economy is modeled as a so-called Markov-switching framework.
- Subjects
ECONOMIC statistics; ECONOMIC models; MONETARY policy; MARKOV processes; INTEREST rates
- Publication
Bank of England Quarterly Bulletin, 2006, Vol 46, Issue 2, p179
- ISSN
0005-5166
- Publication type
Article