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DYNARE: A program for the simulation of rational expectation models

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  • Michel Juillard

Abstract

DYNARE: A program for the simulation of rational expectation models Michel Juillard (CEPREMAP and University Paris 8) DYNARE is a user oriented general program for the simulation of deterministic or stochastic models. For linear models, it implements a generalized Schur decomposition algorithm; for deterministic non--linear models, a Newton--type method and for stochastic non--linear models, a second order Taylor approximation algorithm. The user writes the model and the computational tasks to be accomplished in a usual modelling language and in a text file. A parser then translates it either in a GAUSS or in a MATLAB program. The algorithms are implemented in two libraries, one for GAUSS, one for MATLAB. In a deterministic setup, DYNARE can compute the anticipatory reaction and the inertial response of a model in the presence of one or several fully anticipated shocks, the response to unanticipated shocks, the convergence toward equilibrium or the transition between two equilibria. It is also possible to add constraints to the model such as a liquidity constraint. For stochastic models, DYNARE computes a second order Taylor approximation of decision rules. Doing so, it takes into account the non certainty equivalence of non--linear stochastic models. As it is only an approximation of rational expectations, it also provides some measure of the quality of the approximation. To our knowledge and to this day, DYNARE is the only general purpose simulation program permitting to do so. After a brief review of the algorithms, the paper presents a series of experiments that can be computed with DYNARE.

Suggested Citation

  • Michel Juillard, 2001. "DYNARE: A program for the simulation of rational expectation models," Computing in Economics and Finance 2001 213, Society for Computational Economics.
  • Handle: RePEc:sce:scecf1:213
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    Cited by:

    1. Totzek, Alexander, 2009. "Firms' heterogeneity, endogenous entry, and exit decisions," Economics Working Papers 2009-11, Christian-Albrechts-University of Kiel, Department of Economics.
    2. Liu, Chunping & Minford, Patrick, 2014. "How important is the credit channel? An empirical study of the US banking crisis," Journal of Banking & Finance, Elsevier, vol. 41(C), pages 119-134.
    3. Wieland, Volker & Cwik, Tobias & Müller, Gernot J. & Schmidt, Sebastian & Wolters, Maik, 2012. "A new comparative approach to macroeconomic modeling and policy analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 83(3), pages 523-541.
    4. Sugo, Tomohiro & Ueda, Kozo, 2008. "Estimating a dynamic stochastic general equilibrium model for Japan," Journal of the Japanese and International Economies, Elsevier, vol. 22(4), pages 476-502, December.
    5. Martinez-Garcia, Enrique & Søndergaard, Jens, 2008. "The real exchange rate in sticky price models: does investment matter?," Globalization and Monetary Policy Institute Working Paper 17, Federal Reserve Bank of Dallas.
    6. Le, Vo Phuong Mai & Meenagh, David & Minford, Patrick & Wickens, Michael, 2011. "How much nominal rigidity is there in the US economy? Testing a new Keynesian DSGE model using indirect inference," Journal of Economic Dynamics and Control, Elsevier, vol. 35(12), pages 2078-2104.
    7. Liu, Chunping & Minford, Patrick, 2014. "Comparing behavioural and rational expectations for the US post-war economy," Economic Modelling, Elsevier, vol. 43(C), pages 407-415.
    8. Matthias Paustian, 2005. "The role of contracting schemes for the welfare costs of nominal rigidities," Computing in Economics and Finance 2005 196, Society for Computational Economics.
    9. Schmidt, Sebastian & Wieland, Volker, 2013. "The New Keynesian Approach to Dynamic General Equilibrium Modeling: Models, Methods and Macroeconomic Policy Evaluation," Handbook of Computable General Equilibrium Modeling, Elsevier.
    10. Bojan Markovic & Laura Povoledo, 2011. "Does Asias choice of exchange rate regime affect Europes exposure to US shocks?," Economic Issues Journal Articles, Economic Issues, vol. 16(2), pages 1-38, September.
    11. Patrick Minford & Yongdeng Xu & Peng Zhou, 2015. "How Good are Out of Sample Forecasting Tests on DSGE Models?," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 1(3), pages 333-351, November.
    12. Ding Ding & Rahul Anand & Shanaka J Peiris, 2011. "Towards Inflation Targeting in Sri Lanka," IMF Working Papers 11/81, International Monetary Fund.
    13. Totzek, Alexander, 2009. "Banks and early deposit withdrawals in a new Keynesian framework," Economics Working Papers 2009-08, Christian-Albrechts-University of Kiel, Department of Economics.
    14. Marzo, Massimiliano, 2009. "Wage or price-based inflation? Alternative targets in optimal monetary policy rules," Journal of Economic Dynamics and Control, Elsevier, vol. 33(6), pages 1296-1313, June.
    15. Sevim Kosem Alp, 2010. "Optimal Monetary Policy under Sectoral Heterogeneity in Inflation Persistence (Sektorel Enflasyon Ataleti Farkliligi Altinda Optimal Para Politikasi)," Working Papers 1004, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    16. Micheli, Martin & Schmidt, Torsten, 2015. "Welfare effects of rent control — A comparison of redistributive policies," Economic Modelling, Elsevier, vol. 48(C), pages 237-247.

    More about this item

    Keywords

    rational expectations; simulations; computer program;

    JEL classification:

    • C88 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Other Computer Software
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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