IDEAS home Printed from https://ideas.repec.org/a/cup/macdyn/v29y2025ip-_103.html
   My bibliography  Save this article

Auxiliary state method: theory and application

Author

Listed:
  • Ngo, Phuong V.

Abstract

In this paper, I propose a new method called the auxiliary state method (ASM) for solving highly nonlinear dynamic stochastic general equilibrium (DSGE) models with state variables that exhibit a non-elliptical ergodic distribution. The ASM method effectively avoids most improbable states that, while never visited, can create issues for numerical methods. I then demonstrate the ASM method by applying it to a model with highly asymmetric nominal rigidities, which are necessary to match the skewness of the U.S. inflation distribution. The ASM method can handle the high level of asymmetry, whereas the standard projection method cannot. Additionally, the ASM method is significantly faster than the standard projection method.

Suggested Citation

  • Ngo, Phuong V., 2025. "Auxiliary state method: theory and application," Macroeconomic Dynamics, Cambridge University Press, vol. 29, pages 1-1, January.
    • Handle: RePEc:cup:macdyn:v:29:y:2025:i::p:-_103
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S1365100525000318/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    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:cup:macdyn:v:29:y:2025:i::p:-_103. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/mdy .

    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.