Generalizing the Taylor Principle: New Comment

Barthélemy, Jean; Marx, Magali

doi:10.2139/ssrn.2168214

Cited by 21 publications

(17 citation statements)

References 41 publications

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“…More formally, we denote by u t ∈ U the concatenation of the regime and the shocks 2 In a companion paper (Barthélemy and Marx, 2012), we provide the conditions guaranteing the uniqueness of a bounded solution for linear and forward-looking Markov switching models.…”

Section: The Class Of Modelsmentioning

confidence: 99%

“…This class of linear Markov switching models has been studied by Cho (2009) andFarmer et al (2009b) using mean square stability and by Barthélemy and Marx (2012) using boundedness stability. A refinement of Barthélemy and Marx (2012) leads to the following determinacy condition:…”

Section: Exogenous Shocks Endogenous Regime Switchingmentioning

confidence: 99%

“…Therefore, the determinacy conditions can be difficult to check in practice. Barthélemy and Marx (2012) give ways to circumvent this computational difficulty. We refer to this paper for further details.…”

Section: Exogenous Shocks Endogenous Regime Switchingmentioning

confidence: 99%

“…For an extended discussion about the determinacy conditions of this model we refer to Barthélemy and Marx (2012). We fix parameter values as in Lubik and Schorfheide (2004) and Davig and Leeper (2007).…”

Section: A New-keynesian Modelmentioning

confidence: 99%

“…1 Introduction Barthélemy and Marx (2012), we characterize determinacy conditions for this class of models (Proposition 2) and provide first-and second-order Taylor expansions of the solution (Proposition 3). The state-dependence affects first-order terms only if the steady-states differ across regimes, otherwise the endogeneity has an impact at second-order only.…”

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confidence: 99%

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State-Dependent Probability Distributions in Non Linear Rational Expectations Models

Barthélemy

Marx

2011

SSRN Journal

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In this paper, we solve a large class of non-linear rational expectations models with regime switching, i.e. recurring shifts in parameters. The regime-switches and the shocks may follow state-dependent probability distributions. First, we provide sufficient conditions for the existence of a unique stable equilibrium using a perturbation approach.Then, we provide Taylor expansions of the solution in subclasses of models. Finally, we put forward that state-dependent fluctuations of transition probabilities can substantially alter the equilibrium dynamics through economic agents' expectations. We illustrate these modifications in the context of a Fisherian model of inflation and a NewKeynesian model in which monetary policy switches endogenously between a passive and an active reaction to inflation.

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Section: The Class Of Modelsmentioning

confidence: 99%

Section: Exogenous Shocks Endogenous Regime Switchingmentioning

confidence: 99%

Section: Exogenous Shocks Endogenous Regime Switchingmentioning

confidence: 99%

Section: A New-keynesian Modelmentioning

confidence: 99%

mentioning

confidence: 99%

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State-Dependent Probability Distributions in Non Linear Rational Expectations Models

Barthélemy

Marx

2011

SSRN Journal

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Solving endogenous regime switching models

Barthélemy

Marx

2017

Journal of Economic Dynamics and Control

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This paper solves rational expectations models in which structural parameters switch across multiple regimes according to state-dependent (endogenous) transition probabilities. Assuming small shocks and smooth transition probabilities, we apply a perturbation approach. We first provide for conditions under which a unique bounded equilibrium exists. We then compute first-and second-order approximations. In a new-Keynesian model with monetary policy switching, we document new effects of monetary policy switching when transition probabilities depend on inflation.

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The zero lower bound: frequency, duration, and numerical convergence

Richter

Throckmorton

2015

The B.E. Journal of Macroeconomics

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When monetary policy faces a zero lower bound (ZLB) constraint on the nominal interest rate, a minimum state variable (MSV) solution may not exist even if the Taylor principle holds when the ZLB does not bind. This paper shows there is a clear tradeoff between the expected frequency and average duration of ZLB events along the boundary of the convergence region -the region of the parameter space where our policy function iteration algorithm converges to an MSV solution. We show this tradeoff with two alternative stochastic processes: one where monetary policy follows a 2-state Markov chain, which exogenously governs whether the ZLB binds, and the other where ZLB events are endogenous due to discount factor or technology shocks. We also show that small changes in the parameters of the stochastic processes cause meaningful differences in the decision rules and where the ZLB binds in the state space.

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Generalizing the Taylor Principle: New Comment

Abstract: Classification JEL: E31, E43 et E52. Mots-clés: changements de régime, DSGE, indétermination.Abstract: In this paper, we provide determinacy conditions, i.e. conditions ensuring the existence and uniqueness of a bounded solution, in a purely forward-looking linear Markov

Cited by 21 publications

References 41 publications

State-Dependent Probability Distributions in Non Linear Rational Expectations Models

State-Dependent Probability Distributions in Non Linear Rational Expectations Models

Solving endogenous regime switching models

The zero lower bound: frequency, duration, and numerical convergence

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