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Review of Solution and Estimation Methods for Nonlinear Dynamic Stochastic General Equilibrium Models with the Zero Lower Bound

Author

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  • Yasuo Hirose
  • Takeki Sunakawa

Abstract

We review solution and estimation methods for nonlinear dynamic stochastic general equilibrium models and their application, with a special focus on the zero lower bound on the nominal interest rate. In a fully nonlinear setting, both the solution and estimation methods involve iterative procedures, and their computational expense grows rapidly with an increase in the dimensionality of state variables and parameters. We describe how the procedures deal with the dimensionality problem.

Suggested Citation

  • Yasuo Hirose & Takeki Sunakawa, 2019. "Review of Solution and Estimation Methods for Nonlinear Dynamic Stochastic General Equilibrium Models with the Zero Lower Bound," The Japanese Economic Review, Japanese Economic Association, vol. 70(1), pages 51-104, March.
    • Handle: RePEc:bla:jecrev:v:70:y:2019:i:1:p:51-104
    DOI: 10.1111/jere.12217
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    Cited by:

    1. Yasuo Hirose & Takeki Sunakawa, 2023. "The Natural Rate of Interest in a Non-linear DSGE Model," International Journal of Central Banking, International Journal of Central Banking, vol. 19(1), pages 301-340, March.
    2. Julien Albertini & Stéphane Moyen, 2024. "A General and Efficient Method for Solving Regime-Switching DSGE Models," Computational Economics, Springer;Society for Computational Economics, vol. 64(6), pages 3645-3682, December.
    3. Burkhard Heer & Alfred Maußner, 2024. "Dynamic General Equilibrium Modeling," Springer Texts in Business and Economics, Springer, edition 3, number 978-3-031-51681-8, March.
    4. Keiichiro KOBAYASHI & Daichi SHIRAI, 2024. "Debt-Ridden Borrowers and Persistent Stagnation," CIGS Working Paper Series 23-001E, The Canon Institute for Global Studies.

    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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