Solving Rational Expectations Models with Informational Subperiods: A Comment

Kormilitsina (Comput Econ 41(4): 525–555, 2013) develops a perturbation-based algorithm to solve up to the second order of approximation rational expectations models with informational subperiods (timing restrictions). It is there claimed that the restricted framework inherits equilibrium (non)uniqueness properties from its unrestricted counterpart. This comment provides an example where timing restrictions cause non-existence of dynamically stable equilibria, even though the model’s unrestricted counterpart exhibits saddle-path stability. Implications for the execution of Kormilitsina’s algorithm are discussed.