Exploiting Model Structure to Solve the Dynamics of a Macro Model
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.
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- Ray C. Fair & John B. Taylor, 1980.
"Solution and Maximum Likelihood Estimation of Dynamic Nonlinear Rational Expectations Models,"
Cowles Foundation Discussion Papers
564, Cowles Foundation for Research in Economics, Yale University.
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- 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.
- Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-11, July.
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