A Continuity Refinement for Rational Expectations Solutions / Bennett T. McCallum.

Format:

Book

Author/Creator:

McCallum, Bennett T.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w18323.

NBER working paper series no. w18323

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2012.

Summary:

Linear RE models typically possess a multiplicity of solutions. Consider, however, the requirement that the solution coefficients must not be infinitely discontinuous in the model's structural parameters. In particular, we require that the solutions should be continuous in the limit as those parameters, which express quantitatively the extent to which expectations affect endogenous variables, go to zero. The paper shows that under this condition there is, for a very broad class of linear RE models, only a single solution.

Notes:

Print version record

August 2012.