Approximate Solutions to Dynamic Models - Linear Methods
Linear Methods are often used to compute approximate solutions to dynamic models, as these models often cannot be solved analytically. Linear methods are very popular, as they can easily be implemented. Also, they provide a useful starting point for understanding more elaborate numerical methods. It shall be described here first for the example of a simple real business cycle model, including how to easily generate the log-linearized equations needed before solving the linear system. For a general framework, formulas are provided for calculating the recursive law of motion. The algorithm described here is implemented with the "toolkit" programs available per
|Date of creation:||Apr 2006|
|Contact details of provider:|| Postal: Spandauer Str. 1,10178 Berlin|
Web page: http://sfb649.wiwi.hu-berlin.de
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- Taylor, John B & Uhlig, Harald, 1990.
"Solving Nonlinear Stochastic Growth Models: A Comparison of Alternative Solution Methods,"
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- Binder, M. & Pesaran, H., 1996. "Multivariate Linear Rational Expectations Models: Characterisation of the Nature of the Solutions and Their Fully Recursive Computation," Cambridge Working Papers in Economics 9619, Faculty of Economics, University of Cambridge.
- Michael Binder & M. Hashem Pesaran, 1997. "GAUSS and Matlab codes for Multivariate Linear Rational Expectations Models: Characterization of the Nature of the Solutions and Their Fully Recursive Computation," QM&RBC Codes 73, Quantitative Macroeconomics & Real Business Cycles.
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- Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-1311, July.
- Sims, Christopher A, 2002. "Solving Linear Rational Expectations Models," Computational Economics, Springer;Society for Computational Economics, vol. 20(1-2), pages 1-20, October.
- Christopher Sims, 2001. "Matlab Code for Solving Linear Rational Expectations Models," QM&RBC Codes 11, Quantitative Macroeconomics & Real Business Cycles.
- Roger E. A. Farmer, 1999. "Macroeconomics of Self-fulfilling Prophecies, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262062038, January. Full references (including those not matched with items on IDEAS)
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