On Linear Quadratic Approximations
We prove the generality of the methodology proposed in Benigno and Woodford (2006). We show that, even in the presence of a distorted steady state, it is always possible and relatively simple to obtain a purely quadratic approximation to the welfare measure. We also show that, in order to do so, the timeless perspective assumption is crucial.
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|Date of revision:||Jul 2006|
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- Jinill Kim and Sunghyun Henry Kim, 2001.
"Spurious Welfare Reversals in International Business Cycle Models,"
Computing in Economics and Finance 2001
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