Abstract In this paper we use a modified neoclassical business cycle model to test two competing explanations of the expansion of the 1990s. The model can have indeterminate, multiple equilibria that give rise to expectation-driven business cycles. We fit into the model series of estimated...

We consider the stability under adaptive learning of the complete set of solutions to the model when . In addition to the fundamentals solution, the literature describes both finite-state Markov sunspot solutions, satisfying a resonant frequency condition, and autoregressive solutions depending...

This paper studies identification of linear rational expectations models under news shocks. Exploiting the general martingale difference solution approach, we show that news shocks models are observationally equivalent to a class of indeterminate equilibrium frameworks which are subject only,...