Real business cycle models have recently been applied to settings in which equilibria are suboptimal. In most models the solutions are approximated using some type of linearization with little attention being given to the accuracy of the approximation. In this paper we investigate three different approximation methods in the context of a neoclassical model with a production tax and compare their solutions with solutions obtained from a discrete state space solution to the Euler equations of the model.
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Paper provided by Federal Reserve Bank of Richmond in its series Working Paper with number
90-11.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Wouter J. den Haan & Albert Marcet, 1993.
"Accuracy in Simulations,"
Economics Working Papers
42, Department of Economics and Business, Universitat Pompeu Fabra.
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