Navegando por Autor "Ascari, Guido"

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Rational Sunspots
(2016) Ascari, Guido; Banomolo, Paolo; HEDIBERT FREITAS LOPES
The instability of macroeconomic variables is usually ruled out by rational expectations. We propose a generalization of the rational expectations framework to estimate possible temporary unstable paths. Our approach yields drifting parameters and stochastic volatility. The methodology allows the data to choose between diferent possible alternatives: determinacy, indeterminacy and instability. We apply our methodology to US inflation dynamics in the '70s through the lens of a simple New Keynesian model. When unstable RE paths are allowed, the data unambiguously select them to explain the stagflation period in the '70s. Thus, our methodology suggests that US inflation dynamics in the '70s is better described by unstable rational equilibrium paths.
Walk on the Wild Side: Temporarily Unstable Paths and Multiplicative Sunspots
(2019) Ascari, Guido; Bonomolo, Paolo; HEDIBERT FREITAS LOPES
We propose a generalization of the rational expectations framework to allow for temporarily unstable paths. Our approach introduces multiplicative sunspot shocks and it yields drifting parameters and stochastic volatility. Then, we provide an econometric strategy to estimate this generalized model on the data. The methodology allows the data to choose between different possible alternatives: determinacy, indeterminacy, and temporary instability. We apply our methodology to US inflation dynamics in the 1970s through the lens of a simple New Keynesian model. When temporarily unstable paths are allowed, the data unambiguously select them to explain the stagflation period in the 1970s.
Walk on the Wild Side: Temporarily Unstable Paths and Multiplicative Sunspots
(2019) Ascari, Guido; Banomolo, Paolo; HEDIBERT FREITAS LOPES