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Essays In Adaptive Learning And Mean-Square Stability In Regime Switching Models, Jason Robert Reed

Wayne State University Dissertations

The first chapter of this dissertation analyzes the necessary and sufficient conditions for stability under recurring structural changes. Using a finite state Markov process to model stochastically evolving, state-dependent parameters I find that by employing the conditions unique to mean-square stability, the minimum state variable (MSV) solution, found in non-linear models of this reduced form, is also stable in the learning sense. However, the choice of parameter values limits the robustness of this result. Furthermore, to illustrate this outcome I develop empirical results for a model similar to Cagan’s 1956 work on hyperinflation for Germany and the United States. I …