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DYNARE: A program for the simulation of rational expectation models

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  • Michel Juillard

Abstract

DYNARE: A program for the simulation of rational expectation models Michel Juillard (CEPREMAP and University Paris 8) DYNARE is a user oriented general program for the simulation of deterministic or stochastic models. For linear models, it implements a generalized Schur decomposition algorithm; for deterministic non--linear models, a Newton--type method and for stochastic non--linear models, a second order Taylor approximation algorithm. The user writes the model and the computational tasks to be accomplished in a usual modelling language and in a text file. A parser then translates it either in a GAUSS or in a MATLAB program. The algorithms are implemented in two libraries, one for GAUSS, one for MATLAB. In a deterministic setup, DYNARE can compute the anticipatory reaction and the inertial response of a model in the presence of one or several fully anticipated shocks, the response to unanticipated shocks, the convergence toward equilibrium or the transition between two equilibria. It is also possible to add constraints to the model such as a liquidity constraint. For stochastic models, DYNARE computes a second order Taylor approximation of decision rules. Doing so, it takes into account the non certainty equivalence of non--linear stochastic models. As it is only an approximation of rational expectations, it also provides some measure of the quality of the approximation. To our knowledge and to this day, DYNARE is the only general purpose simulation program permitting to do so. After a brief review of the algorithms, the paper presents a series of experiments that can be computed with DYNARE.

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Bibliographic Info

Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2001 with number 213.

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Date of creation: 01 Apr 2001
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Handle: RePEc:sce:scecf1:213

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Web page: http://www.econometricsociety.org/conference/SCE2001/SCE2001.html
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Keywords: rational expectations; simulations; computer program;

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Cited by:
  1. Bojan Markovic & Laura Povoledo, 2007. "Does Asia's choice of exchange rate regime affect Europe's exposure to US shocks?," Bank of England working papers 318, Bank of England.
  2. Schmidt, Sebastian & Wieland, Volker, 2013. "The New Keynesian Approach to Dynamic General Equilibrium Modeling: Models, Methods and Macroeconomic Policy Evaluation," Handbook of Computable General Equilibrium Modeling, Elsevier.
  3. Wieland, Volker & Cwik, Tobias & Müller, Gernot J. & Schmidt, Sebastian & Wolters, Maik, 2012. "A new comparative approach to macroeconomic modeling and policy analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 83(3), pages 523-541.
  4. Ding Ding & Rahul Anand & Shanaka J. Peiris, 2011. "Toward Inflation Targeting in Sri Lanka," IMF Working Papers 11/81, International Monetary Fund.
  5. Sevim Kosem Alp, 2010. "Optimal Monetary Policy under Sectoral Heterogeneity in Inflation Persistence (Sektorel Enflasyon Ataleti Farkliligi Altinda Optimal Para Politikasi)," Working Papers 1004, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  6. Martinez-Garcia, Enrique & Sondergaard, Jens, 2009. "The real exchange rate in sticky-price models: does investment matter?," Bank of England working papers 368, Bank of England.
  7. Le, Vo Phuong Mai & Meenagh, David & Minford, Patrick & Wickens, Michael, 2008. "How much nominal rigidity is there in the US economy? Testing a New Keynesian DSGE Model using indirect inference," Cardiff Economics Working Papers E2008/32, Cardiff University, Cardiff Business School, Economics Section, revised Jul 2011.
  8. Totzek, Alexander, 2009. "Firms' heterogeneity, endogenous entry, and exit decisions," Economics Working Papers 2009,11, Christian-Albrechts-University of Kiel, Department of Economics.
  9. Totzek, Alexander, 2009. "Banks and early deposit withdrawals in a new Keynesian framework," Economics Working Papers 2009,08, Christian-Albrechts-University of Kiel, Department of Economics.
  10. Marzo, Massimiliano, 2009. "Wage or price-based inflation? Alternative targets in optimal monetary policy rules," Journal of Economic Dynamics and Control, Elsevier, vol. 33(6), pages 1296-1313, June.
  11. Matthias Paustian, 2005. "The role of contracting schemes for the welfare costs of nominal rigidities," Computing in Economics and Finance 2005 196, Society for Computational Economics.
  12. Sevim Kosem-Alp, 2009. "The (Ir)relevance of Inflation Persistence for Inflation Targeting Policy Design," Departmental Working Papers 0903, Bilkent University, Department of Economics.

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