IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_266.html
   My bibliography  Save this paper

Exploiting Model Structure to Solve the Dynamics of a Macro Model

Author

Listed:
  • Ric D. Herbert
  • Peter Stemp
  • Peter J. Stemp

Abstract

This paper considers alternative approaches to solving the time-path of a representative agent model following an exogenous shock. The model has a number of important dynamic properties that are both common to a wide range of economic models and have important computational implications for solving the model. The paper compares the alternative approaches on a computational basis and shows that the best approach to solving the model is obtained by fully exploiting the model structure in a modified reverse shooting algorithm.

Suggested Citation

  • Ric D. Herbert & Peter Stemp & Peter J. Stemp, 2000. "Exploiting Model Structure to Solve the Dynamics of a Macro Model," CESifo Working Paper Series 266, CESifo.
    • Handle: RePEc:ces:ceswps:_266
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo_wp266.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Douglas Cleveland, 1985. "Analysis," Challenge, Taylor & Francis Journals, vol. 28(4), pages 50-53, September.
    2. Fair, Ray C & Taylor, John B, 1983. "Solution and Maximum Likelihood Estimation of Dynamic Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 51(4), pages 1169-1185, July.
    3. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, December.
    4. Boucekkine, Raouf, 1995. "An alternative methodology for solving nonlinear forward-looking models," Journal of Economic Dynamics and Control, Elsevier, vol. 19(4), pages 711-734, May.
    5. Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-1311, July.
    6. Anderson, Gary & Moore, George, 1985. "A linear algebraic procedure for solving linear perfect foresight models," Economics Letters, Elsevier, vol. 17(3), pages 247-252.
    7. Matsuyama, Kiminori, 1987. "Current account dynamics in a finite horizon model," Journal of International Economics, Elsevier, vol. 23(3-4), pages 299-313, November.
    8. Zadrozny, Peter A., 1998. "An eigenvalue method of undetermined coefficients for solving linear rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 22(8-9), pages 1353-1373, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Stemp, Peter J. & Herbert, Ric D., 2003. "Calculating short-run adjustments: Sensitivity to non-linearities in a representative agent framework," Journal of Economic Dynamics and Control, Elsevier, vol. 27(3), pages 357-379, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Coenen, Gunter & Wieland, Volker, 2003. "The zero-interest-rate bound and the role of the exchange rate for monetary policy in Japan," Journal of Monetary Economics, Elsevier, vol. 50(5), pages 1071-1101, July.
    2. Coenen Günter & Orphanides Athanasios & Wieland Volker, 2004. "Price Stability and Monetary Policy Effectiveness when Nominal Interest Rates are Bounded at Zero," The B.E. Journal of Macroeconomics, De Gruyter, vol. 4(1), pages 1-25, February.
    3. Ajevskis Viktors, 2017. "Semi-global solutions to DSGE models: perturbation around a deterministic path," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 21(2), pages 1-28, April.
    4. Viktors Ajevskis, 2019. "Generalised Impulse Response Function as a Perturbation of a Global Solution to DSGE Models," Working Papers 2019/04, Latvijas Banka.
    5. Günter Coenen & Carlos Montes‐Galdón & Frank Smets, 2023. "Effects of State‐Dependent Forward Guidance, Large‐Scale Asset Purchases, and Fiscal Stimulus in a Low‐Interest‐Rate Environment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 55(4), pages 825-858, June.
    6. Ajevskis, Viktors, 2019. "Nonlocal Solutions To Dynamic Equilibrium Models: The Approximate Stable Manifolds Approach," Macroeconomic Dynamics, Cambridge University Press, vol. 23(6), pages 2544-2571, September.
    7. Ajevskis, Viktors, 2014. "Global Solutions to DSGE Models as a Perturbation of a Deterministic Path," MPRA Paper 55145, University Library of Munich, Germany.
    8. Yongyang Cai & Kenneth L. Judd, 2023. "A simple but powerful simulated certainty equivalent approximation method for dynamic stochastic problems," Quantitative Economics, Econometric Society, vol. 14(2), pages 651-687, May.
    9. Stefan Laséen & Lars E.O. Svensson, 2011. "Anticipated Alternative policy Rate Paths in Plicy Simulations," International Journal of Central Banking, International Journal of Central Banking, vol. 7(3), pages 1-35, September.
    10. Stefan Laséen & Lars E.O. Svensson, 2009. "Anticipated Alternative Instrument-Rate Paths in Policy Simulations," NBER Working Papers 14902, National Bureau of Economic Research, Inc.
    11. Aksoy, Yunus & Orphanides, Athanasios & Small, David & Wieland, Volker & Wilcox, David, 2006. "A quantitative exploration of the opportunistic approach to disinflation," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 1877-1893, November.
    12. Fujiwara, Ippei & Hara, Naoko & Hirose, Yasuo & Teranishi, Yuki, 2005. "The Japanese Economic Model (JEM)," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 23(2), pages 61-142, May.
    13. Coenen, Günter & Montes-Galdón, Carlos & Schmidt, Sebastian, 2021. "Macroeconomic stabilisation and monetary policy effectiveness in a low-interest-rate environment," Journal of Economic Dynamics and Control, Elsevier, vol. 132(C).
    14. Peter Stemp & Ric Herbert, 2006. "Solving Non-Linear Models with Saddle-Path Instabilities," Computational Economics, Springer;Society for Computational Economics, vol. 28(2), pages 211-231, September.
    15. Juillard, Michel & Laxton, Douglas & McAdam, Peter & Pioro, Hope, 1998. "An algorithm competition: First-order iterations versus Newton-based techniques," Journal of Economic Dynamics and Control, Elsevier, vol. 22(8-9), pages 1291-1318, August.
    16. Francisco A. Gallego & Klaus Schmidt-Hebbel & Luis Servén, 2004. "General Equilibrium Dynamics of External Shocks and Policy Changes in Chile," Working Papers Central Bank of Chile 271, Central Bank of Chile.
    17. Gary Anderson, 2008. "Solving Linear Rational Expectations Models: A Horse Race," Computational Economics, Springer;Society for Computational Economics, vol. 31(2), pages 95-113, March.
    18. Lan, Hong & Meyer-Gohde, Alexander, 2013. "Solving DSGE models with a nonlinear moving average," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2643-2667.
    19. Stradi-Granados, Benito A. & Haven, Emmanuel, 2010. "The use of interval arithmetic in solving a non-linear rational expectation based multiperiod output-inflation process model: The case of the IN/GB method," European Journal of Operational Research, Elsevier, vol. 203(1), pages 222-229, May.
    20. Gauti Eggertsson & Sergey Egiev & Alessandro Lin & Josef Platzer & Luca Riva, 2021. "A Toolkit for Solving Models with a Lower Bound on Interest Rates of Stochastic Duration," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 41, pages 121-173, July.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_266. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.