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- Title
SOLVING LINEAR RATIONAL EXPECTATIONS MODELS WITH PREDICTABLE STRUCTURAL CHANGES.
- Authors
Cagliarini, Adam; Kulish, Mariano
- Abstract
Standard solution methods for linear stochastic models with rational expectations presuppose a time-invariant structure. Consequently, credible announcements that entail future changes of the structure cannot be handled by standard solution methods. This paper develops the solution for linear stochastic rational expectations models in the face of a finite sequence of anticipated structural changes. These events encompass anticipated changes to the structural parameters and also anticipated additive shocks. We apply the solution to some examples of practical relevance to monetary policy.
- Subjects
RATIONAL expectations (Economic theory); STOCHASTIC models; LINEAR statistical models; TIME &; economic reactions; PRICE inflation; MONETARY policy; MATHEMATICAL models
- Publication
Review of Economics & Statistics, 2013, Vol 95, Issue 1, p328
- ISSN
0034-6535
- Publication type
Article
- DOI
10.1162/REST_a_00240