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A Unified Approach to Determinacy Conditions with Regime Switching

Author

Listed:
  • Jean Barthelemy

    (Banque de France)

  • Seonghoon Cho

    (Yonsei University)

  • Magali Marx

    (Banque de France)

Abstract
The conditions that ensure the existence of a unique stable equilibrium — determinacy conditions — for rational expectations models with Markov switching depend on the stability concept, contrasting with standard linear rational expectations models. In this paper, we offer a unified framework for the two commonly used stability concepts: boundedness and mean-square stability. We derive determinacy conditions for both concepts based on simple metrics. Qualitatively, we show that mean-square stable solutions are always at least as many as bounded solutions. We then apply and discuss our results in two monetary models. (Copyright: Elsevier)

Suggested Citation

  • Jean Barthelemy & Seonghoon Cho & Magali Marx, 2024. "A Unified Approach to Determinacy Conditions with Regime Switching," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 54, October.
    • Handle: RePEc:red:issued:23-89
    DOI: 10.1016/j.red.2024.101240
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    References listed on IDEAS

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