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A TRACTABLE FRAMEWORK FOR ANALYZING A CLASS OF NONSTATIONARY MARKOV MODELS

05.12.2018
Dynamic stochastic economic models normally build on the assumption of time-invariant preferences, technology and laws of motions for exogenous variables. We relax this assumption and consider a class of infinite-horizon nonstationary models in which parameters can follow both deterministic and stochastic trends: the former trends take the form of anticipated shifts and drifts, and the latter trends take the form of Markov process with time-varying transition probabilities.