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A Toolbox for the Numerical Study of Linear Dynamic Rational Expectations Models

Author

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  • Marcelo Oviedo

    (Department of Economics, Iowa State University)

Abstract

By simplifying the computational tasks and by providing step-by-step explanations of the procedures required to study a linear dynamic rational expectations (LDRE) model, this paper and the accompanying “LDRE Toolbox” of Matlab functions guide a researcher with almost no experience in computational work to resolve and study his own model. After coding the model following specific guidelines, a single function call is all that is needed to log-linearize the model; simulate it under exogenous sequences of shocks; compute sample and population moment conditional models in the Real-Business-Cycles literature are solved and studied throughout to give detailed examples of the steps involved in solving and studying LDRE models using the LDRE Toolbox. Namely, the economies in Brock and Mirman (Optimal Growth and Uncertainty: the Discounted Case, Journal of Economic Theory 4(3): 479-513; 1972); King, Plosser, and Rebelo (Production, Growth and Business Cycles I: The Basic Neoclassical Model, Journal of Monetary Economics 21: 195-232; 1988); and Mendoza (Real Business Cycles in a Small Open Economy, American Economic Review 81(4): 797-818; 1991).

Suggested Citation

  • Marcelo Oviedo, 2005. "A Toolbox for the Numerical Study of Linear Dynamic Rational Expectations Models," Económica, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 0(1-2), pages 91-136, January-D.
    • Handle: RePEc:lap:journl:544
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    Citations

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    Cited by:

    1. Echeverria Garaigorta, Paulina Elisa & Iza Padilla, María Amaya, 2011. "Business cycles in a small open economy: The case of Hong Kong," DFAEII Working Papers 1988-088X, University of the Basque Country - Department of Foundations of Economic Analysis II.
    2. Amin, Sakib & Marsiliani, Laura & Renström, Thomas, 2018. "The Impacts of Fossil Fuel Subsidy Removal on Bangladesh Economy," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 41(02), pages 65-81, June.
    3. Zhu, Jianhua & Jolly, Robert W., 2005. "Dynamic Dividend and Investment Decisions in Value Added Firms: An Application to Farmer Owned Ethanol Plants," 2005 Agricultural and Rural Finance Markets in Transition, October 3-4, 2005, Minneapolis, Minnesota 132765, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.

    More about this item

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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