The authors use a Bayesian Markov chain Monte Carlo algorithm to estimate a model that allows temporary gaps between a true expectational Phillips curve and the monetary authority’s approximating nonexpectational Phillips curve. A dynamic programming problem implies that the monetary...

This paper is about the properties of Markov-switching rational expectations (MSRE) models. We discuss possible solution concepts for MSRE models, distinguishing between stationary and bounded equilibria. For the case of models with one variable, we provide a necessary and sufficient condition...

The inference for hidden Markov chain models in which the structure is a multiple-equation macroeconomic model raises a number of difficulties that are not as likely to appear in smaller models. One is likely to want to allow for many states in the Markov chain without allowing the number of...