Linear Approximation Methods and International Real Business Cycles with Incomplete Asset Markets
Most quantitative studies of international real business cycle (IRBC) models require the use of approximate solution methods. We solve an IRBC model with incomplete asset markets using King, Plosser and Rebelo's (1988) linear approximation method. We quantify the additional approximation error brought about by the existence of a unit root in the linear dynamic system and demonstrate that the symmetry of the model helps reduce this approximation error. A central finding is that the parametrizations which address the cross-country consumption correlation puzzle are precisely those where solutions may be least accurate.
|Date of creation:||01 Aug 2000|
|Date of revision:|
|Contact details of provider:|| Phone: 1 212 998 3820|
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Marianne Baxter & Mario J. Crucini, 1992.
"Business cycles and the asset structure of foreign trade,"
Discussion Paper / Institute for Empirical Macroeconomics
59, Federal Reserve Bank of Minneapolis.
- Baxter, Marianne & Crucini, Mario J, 1995. "Business Cycles and the Asset Structure of Foreign Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 821-54, November.
- Marianne Baxter & Mario J. Crucini, 1994. "Business Cycles and the Asset Structure of Foreign Trade," NBER Working Papers 4975, National Bureau of Economic Research, Inc.
- Baxter, M. & Crucini, M., 1991. "Business Cycles and the Asset Structure of Foreign Trade," RCER Working Papers 316, University of Rochester - Center for Economic Research (RCER).
- Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1992.
"International Real Business Cycles,"
Journal of Political Economy,
University of Chicago Press, vol. 100(4), pages 745-75, August.
- David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1991. "International real business cycles," Staff Report 146, Federal Reserve Bank of Minneapolis.
- David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1987. "International real business cycles," Working Papers 426, Federal Reserve Bank of Minneapolis.
- 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.
- Patrick J. Kehoe & Fabrizio Perri, 2002.
"International Business Cycles with Endogenous Incomplete Markets,"
Econometric Society, vol. 70(3), pages 907-928, May.
- Patrick J. Kehoe & Fabrizio Perri, 2000. "International business cycles with endogenous incomplete markets," Staff Report 265, Federal Reserve Bank of Minneapolis.
- Patrick J. Kehoe & Fabrizio Perri, 2000. "International Business Cycles with Endogenous Incomplete Markets," NBER Working Papers 7870, National Bureau of Economic Research, Inc.
- David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1993.
"International Business Cycles: Theory and Evidence,"
93-21, New York University, Leonard N. Stern School of Business, Department of Economics.
- David Backus & Patrick J. Kehoe & Finn E. Kydland, 1993. "International Business Cycles: Theory and Evidence," NBER Working Papers 4493, National Bureau of Economic Research, Inc.
- Dotsey, Michael & Mao, Ching Sheng, 1992. "How well do linear approximation methods work? : The production tax case," Journal of Monetary Economics, Elsevier, vol. 29(1), pages 25-58, February.
- Kollmann, Robert, 1996.
"Incomplete asset markets and the cross-country consumption correlation puzzle,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 20(5), pages 945-961, May.
- Robert Kollmann, 1996. "Incomplete asset markets and the cross-country consumption correlation puzzle," ULB Institutional Repository 2013/7640, ULB -- Universite Libre de Bruxelles.
- Chris I. Telmer, 1991.
"Asset Pricing Puzzles and Incomplete Markets,"
806, Queen's University, Department of Economics.
- Constantinides,George & Duffie,Darrel, 1992.
"Asset pricing with heterogeneous consumers,"
Discussion Paper Serie A
381, University of Bonn, Germany.
- Amable, Bruno & Henry, Jerome & Lordon, Frederic & Topol, Richard, 1994. "Strong hysteresis versus zero-root dynamics," Economics Letters, Elsevier, vol. 44(1-2), pages 43-47.
- Timothy J Kehoe & David K Levine, 1993.
"Debt Constrained Asset Markets,"
Levine's Working Paper Archive
1276, David K. Levine.
- King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : II. New directions," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 309-341.
- Ravn, Morten O., 1997. "International business cycles in theory and in practice," Journal of International Money and Finance, Elsevier, vol. 16(2), pages 255-283, April.
- Arvanitis, Athanasios V & Mikkola, Anne, 1996. "Asset-Market Structure and International Trade Dynamics," American Economic Review, American Economic Association, vol. 86(2), pages 67-70, May.
- Giavazzi, Francesco & Wyplosz, Charles, 1985. "The Zero Root Problem: A Note on the Dynamic Determination of the Stationary Equilibrium in Linear Models," Review of Economic Studies, Wiley Blackwell, vol. 52(2), pages 353-57, April.
When requesting a correction, please mention this item's handle: RePEc:ecm:wc2000:1539. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.