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Journal Articles Journal of Economic Dynamics and Control Year : 2017

Solving Endogenous Regime Switching Models


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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hal-03945922 , version 1 (18-01-2023)




Jean Barthélemy, Magali Marx. Solving Endogenous Regime Switching Models. Journal of Economic Dynamics and Control, 2017, 77, pp.1-25. ⟨10.1016/j.jedc.2017.01.011⟩. ⟨hal-03945922⟩
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