We consider a linear univariate rational expectations model, with a predetermined variable, and study existence and stability of solutions driven by an extraneous finite-state Markov process. We show that when the model is indeterminate there exists a new class of k-state dependent sunspot...

We study how the use of judgement or “add-factors” in macroeconomic forecasting may disturb the set of equilibrium outcomes when agents learn using recursive methods. We isolate conditions under which new phenomena, which we call exuberance equilibria, can exist in standard macroeconomic...