This paper develops a Limited-Dependent Rational Expectations (LD-RE) model where the bounds can be fixed for an extended period, but are subject to occasional jumps. In this case, the behavior of the endogenous variable is affected by the agent's expectations about both the occurrence and the...

This paper develops the Parameterized Expectations Approach (PEA) for solving nonlinear dynamic stochastic models with rational expectations. The method can be applied to a variety of models, including models with strong nonlinearities, sub-optimal equilibria, and many continuous state...

This paper extends the sticky-price models of Fuhrer and Moore (1995a,b) to include explicit, optimization-based consumption and investment decisions. The goal is to use the resulting model for monetary policy analysis; consequently, strong emphasis is placed on empirical validation of the...

This paper presents new, computationally efficient algorithms for solution and estimation of nonlinear dynamic rational expectations models. The innovations in the algorithms are as follows: (1) The entire solution path is obtained simultaneously by taking a small number of Newton steps, using...

Motivated by recent developments in the bounded rationality and strategic complementarity literatures, we examine an intentionally simple and stylized aggregative economic model when the assumptions of fully rational expectations and no strategic interactions are relaxed. We show that small...

This paper compares the functionality, accuracy, computational efficiency, and practicalities of alternative approaches to solving linear rational expectations models, including the procedures of (Sims, 1996), (Anderson and Moore, 1983), (Binder and Pesaran, 1994), (King and Watson, 1998),...

In this paper, we investigate the properties of alternative monetary policy rules using four structural macroeconometric models: the Fuhrer-Moore model, Taylor's Multi-Country Model, the MSR model of Orphanides and Wieland, and the FRB staff model. All four models incorporate the assumptions of...

We show how to construct arbitrage-free models of the term structure of interest rates in which various expectations hypotheses can hold. McCulloch (1993) provided a Gaussian non-Markovian example of the unbiased expectations hypothesis (U--EH), thereby contradicting the assertion by Cox,...