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Trend inflation, sticky prices, and expectational stability
Kurozumi, Takushi - In: Journal of Economic Dynamics and Control 42 (2014) C, pp. 175-187
indeterminacy of rational expectations equilibrium under the Taylor rule. This paper examines implications of trend inflation for … rational expectations equilibrium is likely to be expectationally stable even in cases of indeterminacy induced by high trend …
Persistent link: https://www.econbiz.de/10010776903
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Escape dynamics: A continuous-time approximation
Kolyuzhnov, Dmitri; Bogomolova, Anna; Slobodyan, Sergey - In: Journal of Economic Dynamics and Control 38 (2014) C, pp. 161-183
We extend a continuous-time approximation approach to the analysis of escape dynamics in economic models with constant gain adaptive learning. This approach is based on the application of the results of continuous-time version of large deviations theory to the linear diffusion approximation of...
Persistent link: https://www.econbiz.de/10010730088
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Heterogeneous expectations in monetary DSGE models
Massaro, Domenico - In: Journal of Economic Dynamics and Control 37 (2013) 3, pp. 680-692
This paper derives a general New Keynesian framework with heterogeneous expectations by explicitly solving the micro-foundations underpinning the model. The resulting reduced form is analytically tractable and encompasses the representative rational agent benchmark as a special case. We specify...
Persistent link: https://www.econbiz.de/10010608462
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Formation of rationally heterogeneous expectations
Pfajfar, Damjan - In: Journal of Economic Dynamics and Control 37 (2013) 8, pp. 1434-1452
This paper models expectation formation by taking into account that agents may produce heterogeneous expectations because of informational frictions and differing levels of a capacity to process information. We show that there are two general classes of steady states within this framework: those...
Persistent link: https://www.econbiz.de/10010679090
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Variety matters
Pavlov, Oscar; Weder, Mark - In: Journal of Economic Dynamics and Control 36 (2012) 4, pp. 629-641
Countercyclical markups are a key transmission mechanism in many endogenous business cycle models. Yet, recent findings suggest that aggregate markups in the US are procyclical. The current model addresses this issue. It extends Galí's (1994) composition of aggregate demand model by endogenous...
Persistent link: https://www.econbiz.de/10011051990
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Non-smooth dynamics and multiple equilibria in a Cournot–Ramsey model with endogenous markups
Brito, Paulo B.; Costa, Luís F.; Dixon, Huw - In: Journal of Economic Dynamics and Control 37 (2013) 11, pp. 2287-2306
We consider a Ramsey model with a continuum of Cournotian industries where free entry generates an endogenous markup. The model produces two different regimes, monopolistic and Cournotian monopolistic competition, resulting in non-smooth dynamics. We analyze the global dynamics of the model,...
Persistent link: https://www.econbiz.de/10011051978
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A mechanism for booms and busts in housing prices
Hillebrand, Marten; Kikuchi, Tomoo - In: Journal of Economic Dynamics and Control 51 (2015) C, pp. 204-217
The paper studies the dynamics of housing prices in a pure exchange overlapping generations framework a la Samuelson (1958) and Gale (1973), which is extended to include housing as a utility-yielding durable good and a credit sector. We completely characterize the equilibrium dynamics, which...
Persistent link: https://www.econbiz.de/10011190679
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Evaluating monetary policy under preferences with zero wealth effect: A Bayesian approach
Dey, Jaya - In: Journal of Economic Dynamics and Control 38 (2014) C, pp. 209-234
Both real and monetary macro models have parallely exploited the potential for various preferences in accounting for … empirical facts. This paper brings the two literatures together by estimating time non-separable preferences with habit … formation in consumption that nests several commonly used preferences. In the absence of wealth effects and external habits …
Persistent link: https://www.econbiz.de/10010730085
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Consumer misperceptions, uncertain fundamentals, and the business cycle
Hürtgen, Patrick - In: Journal of Economic Dynamics and Control 40 (2014) C, pp. 279-292
This paper estimates the importance of shocks to consumer misperceptions “noise shocks” for U.S. business cycle fluctuations. I embed imperfect information as in Lorenzoni (2009) into a Smets and Wouters (2007)-type DSGE model. Agents only observe aggregate productivity and a signal about...
Persistent link: https://www.econbiz.de/10011051947
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Monetary policy transmission in a model with animal spirits and house price booms and busts
Bofinger, Peter; Debes, Sebastian; Gareis, Johannes; … - In: Journal of Economic Dynamics and Control 37 (2013) 12, pp. 2862-2881
Can monetary policy trigger pronounced boom-bust cycles in house prices and create persistent business cycles? We address this question by building heuristics into an otherwise standard DSGE model. As a result, monetary policy sets off waves of optimism and pessimism (“animal spirits”) that...
Persistent link: https://www.econbiz.de/10011051963