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Solving recent RBC models using linearization: further reserves

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  • Boucekkine, Raouf
  • Fagnart, Jean-Francois

Abstract

Through a simple example, we show that the successive sophistications introduced in the early RBC models in order to improve their internal propagation mechanisms have actually increased their non-linearities, even locally. Accordingly, linearization-based resolution methods become much more disputableı than they were for early RBC models. Simple comparative studies ofı impulse-response functions are used to illustrate this point. We conclude by pointing at sorne alternative resolution techniques that allow the model builder to take non-linearities into account and/or to handle with the presence of large state spaces.

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  • Boucekkine, Raouf & Fagnart, Jean-Francois, 1996. "Solving recent RBC models using linearization: further reserves," UC3M Working papers. Economics 3975, Universidad Carlos III de Madrid. Departamento de Economía.
    • Handle: RePEc:cte:werepe:3975
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