The RPEs of RBCs and other DSGEs
Abstract
In a broad class of non-linear representative agent models, represented by a system of difference equations, we replace rational expectations with linear forecast models conditioning on a predetermined set of regressors. Within this framework, a restricted perceptions equilibrium (RPE) corresponds to a forecast rule that is optimal within that class of models. Local uniqueness of a stationary rational expectations equilibrium (REE) near the non-stochastic steady state is shown to guarantee the existence, uniqueness and E-stability of an RPE local to that steady state. A benchmark RBC model with government spending shocks illustrates the theoretical results.
Citation
Evans , D , Evans , G W & McGough , B 2022 , ' The RPEs of RBCs and other DSGEs ' , Journal of Economic Dynamics and Control , vol. In Press , 104492 . https://doi.org/10.1016/j.jedc.2022.104492
Publication
Journal of Economic Dynamics and Control
Status
Peer reviewed
ISSN
0165-1889Type
Journal article
Collections
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