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Refining Linear Rational Expectations Models and Equilibria / Seonghoon Cho, Bennett T. McCallum.
- Format:
- Book
- Author/Creator:
- Cho, Seonghoon.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w18348.
- NBER working paper series no. w18348
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2012.
- Summary:
- 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.
- Notes:
- Print version record
- August 2012.
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