Calculating and using second-order accurate solutions of discrete time dynamic equilibrium models

Jinill Kim; Sunghyun Kim; Ernst Schaumburg; Christopher A. Sims

doi:10.1016/j.jedc.2008.02.003

Calculating and using second-order accurate solutions of discrete time dynamic equilibrium models

Jinill Kim, Sunghyun Kim, Ernst Schaumburg, Christopher A. Sims

Research output: Contribution to journal › Article › peer-review

109 Citations (Scopus)

Abstract

We describe an algorithm for calculating second-order approximations to the solutions to nonlinear stochastic rational expectation models. The paper also explains methods for using such an approximate solution to generate forecasts, simulated time paths for the model, and evaluations of expected welfare differences across different versions of a model. The paper gives conditions for local validity of the approximation that allow for disturbance distributions with unbounded support and allow for non-stationarity of the solution process.

Original language	English
Pages (from-to)	3397-3414
Number of pages	18
Journal	Journal of Economic Dynamics and Control
Volume	32
Issue number	11
DOIs	https://doi.org/10.1016/j.jedc.2008.02.003
Publication status	Published - 2008 Nov
Externally published	Yes

Keywords

DSGE
Perturbation
Pruning
Second-order
Welfare

ASJC Scopus subject areas

Economics and Econometrics
Control and Optimization
Applied Mathematics

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10.1016/j.jedc.2008.02.003

Cite this

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abstract = "We describe an algorithm for calculating second-order approximations to the solutions to nonlinear stochastic rational expectation models. The paper also explains methods for using such an approximate solution to generate forecasts, simulated time paths for the model, and evaluations of expected welfare differences across different versions of a model. The paper gives conditions for local validity of the approximation that allow for disturbance distributions with unbounded support and allow for non-stationarity of the solution process.",

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author = "Jinill Kim and Sunghyun Kim and Ernst Schaumburg and Sims, {Christopher A.}",

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AU - Kim, Sunghyun

AU - Schaumburg, Ernst

AU - Sims, Christopher A.

PY - 2008/11

Y1 - 2008/11

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AB - We describe an algorithm for calculating second-order approximations to the solutions to nonlinear stochastic rational expectation models. The paper also explains methods for using such an approximate solution to generate forecasts, simulated time paths for the model, and evaluations of expected welfare differences across different versions of a model. The paper gives conditions for local validity of the approximation that allow for disturbance distributions with unbounded support and allow for non-stationarity of the solution process.

KW - DSGE

KW - Perturbation

KW - Pruning

KW - Second-order

KW - Welfare

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JO - Journal of Economic Dynamics and Control

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ER -

Calculating and using second-order accurate solutions of discrete time dynamic equilibrium models

Abstract

Keywords

ASJC Scopus subject areas

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