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The Rpes of Rbcs and Other Dsges

29 Pages Posted: 4 Dec 2021 Publication Status: Accepted

See all articles by David Evans

David Evans

University of Oregon

George W. Evans

University of Oregon - Department of Economics; University of St. Andrews - School of Economics and Finance

Bruce McGough

University of Oregon

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 {\em restricted perceptions equilibrium} (RPE) corresponds to a forecast rule that is optimal among that  class of  models.  Local uniqueness of a rational expectations equilibrium (REE) near the non-stochastic steady state is shown to guarantee existence and uniqueness of an RPE local to that steady state.  This RPE is E-stable  provided the REE is E-stable.  A benchmark RBC model with government spending shocks is used to illustrate the theoretical results.

Keywords: Real business cycle model, adaptive learning, E-stability, restricted perceptions

Suggested Citation

Evans, David and Evans, George W. and McGough, Bruce, The Rpes of Rbcs and Other Dsges. Available at SSRN: https://ssrn.com/abstract=3977543 or http://dx.doi.org/10.2139/ssrn.3977543

David Evans (Contact Author)

University of Oregon ( email )

1280 University of Oregon
Eugene, OR 97403
United States

George W. Evans

University of Oregon - Department of Economics ( email )

1285 University of Oregon
Eugene, OR 97403
United States
541-346-4662 (Phone)
541-346-1243 (Fax)

University of St. Andrews - School of Economics and Finance ( email )

The Scores, Castlecliff
St. Andrews, Fife KY16 8RD
United Kingdom
44-1334-462435 (Phone)

HOME PAGE: http://www.st-andrews.ac.uk/economics/staff/pages.g.evans.shtml

Bruce McGough

University of Oregon ( email )

1280 University of Oregon
Eugene, OR 97403
United States

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