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Solving DSGE Portfolio Choice Models with Asymmetric Countries

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  • Dlugoszek, Grzegorz

Abstract

This paper combines the bifurcation theory and the nonlinear moving average approximation to solve asymmetric DSGE models with portfolio choice. Contrary to existing local solution techniques, the proposed method captures the direct effect of risk on agents’ portfolios. The risk-adjusted net and gross asset positions are shown to lie close to the ergodic mean of the global solution. Hence, the method is able to account for asymmetries in the model, which improves accuracy of the approximation.

Suggested Citation

  • Dlugoszek, Grzegorz, 2017. "Solving DSGE Portfolio Choice Models with Asymmetric Countries," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168182, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc17:168182
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    1. Aquino, Juan Carlos, 2018. "The Valuation Channel of External Adjustment in Small Open Economies," Working Papers 2018-011, Banco Central de Reserva del Perú.

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    More about this item

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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