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An OLS approach to computing Ramsey equilibria in medium-scale macroeconomic models

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  • Schmitt-Grohé, Stephanie
  • Uribe, Martín

Abstract

This note describes a general procedure for solving for the steady state and the dynamics implied by the Ramsey equilibrium of medium-scale macroeconomic models. The procedure yields an exact numerical solution for the steady state and second-order accurate dynamics. It introduces a novel projection-based approach to calculating exact solutions to the steady state of Ramsey equilibria.

Suggested Citation

  • Schmitt-Grohé, Stephanie & Uribe, Martín, 2012. "An OLS approach to computing Ramsey equilibria in medium-scale macroeconomic models," Economics Letters, Elsevier, vol. 115(1), pages 128-129.
    • Handle: RePEc:eee:ecolet:v:115:y:2012:i:1:p:128-129
    DOI: 10.1016/j.econlet.2011.12.019
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    References listed on IDEAS

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    1. Stephanie Schmitt-Grohé & Martín Uribe, 2006. "Optimal Fiscal and Monetary Policy in a Medium-Scale Macroeconomic Model," NBER Chapters, in: NBER Macroeconomics Annual 2005, Volume 20, pages 383-462, National Bureau of Economic Research, Inc.
    2. Schmitt-Grohe, Stephanie & Uribe, Martin, 2004. "Solving dynamic general equilibrium models using a second-order approximation to the policy function," Journal of Economic Dynamics and Control, Elsevier, vol. 28(4), pages 755-775, January.
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    Citations

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    Cited by:

    1. Bidyut Talukdar, 2015. "Learning-by-doing and the optimal Ramsey interest rate," Economics Bulletin, AccessEcon, vol. 35(1), pages 53-60.
    2. Etro, Federico & Rossi, Lorenza, 2015. "New-Keynesian Phillips curve with Bertrand competition and endogenous entry," Journal of Economic Dynamics and Control, Elsevier, vol. 51(C), pages 318-340.
    3. Lorenzo Forni & Mehrab Kiarsi, 2023. "Optimal Climate and Monetary-Fiscal Policy in a Climate-DSGE Framework," "Marco Fanno" Working Papers 0299, Dipartimento di Scienze Economiche "Marco Fanno".
    4. repec:ebl:ecbull:eb-14-00864 is not listed on IDEAS
    5. Barbara Annicchiarico & Fabio Di Dio, 2017. "GHG Emissions Control and Monetary Policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(4), pages 823-851, August.
    6. Talukdar, Bidyut, 2017. "Learning-by-doing, organizational capital and optimal markup variations," The Journal of Economic Asymmetries, Elsevier, vol. 15(C), pages 39-47.
    7. Cardani, Roberta & Menna, Lorenzo & Tirelli, Patrizio, 2020. "The Optimal Policy Mix To Achieve Public Debt Consolidation," Macroeconomic Dynamics, Cambridge University Press, vol. 24(1), pages 113-129, January.
    8. John Keating & Andrew Lee Smith, 2013. "Price Versus Financial Stability: A role for money in Taylor rules?," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201307, University of Kansas, Department of Economics.
    9. Lorenzo Menna & Patrizio Tirelli, 2014. "Limited Asset Market Participation and the Optimal Fiscal and Monetary Policies," Working Papers 284, University of Milano-Bicocca, Department of Economics, revised Oct 2014.
    10. Giorgio Motta & Raffaele Rossi, 2013. "Ramsey monetary and fiscal policy: the role of consumption taxation," Working Papers 44449031, Lancaster University Management School, Economics Department.
    11. Lorenzo Menna & Patrizio Tirelli, 2017. "Optimal inflation to reduce inequality," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 24, pages 79-94, March.
    12. Annicchiarico, Barbara & Rossi, Lorenza, 2013. "Optimal monetary policy in a New Keynesian model with endogenous growth," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 274-285.
    13. Roberta, Cardani & Lorenzo, Menna & Patrizio, Tirelli, 2016. "Optimal Public Debt Consolidation with Distributional Conflicts," Working Papers 350, University of Milano-Bicocca, Department of Economics, revised 05 Oct 2016.
    14. Nils Mattis Gornemann, 2018. "HANK meets Ramsey: Optimal Coordination of Monetary and Labor Market Policies," 2018 Meeting Papers 1252, Society for Economic Dynamics.
    15. Lorenzo Menna & Patrizio Tirelli, 2017. "Optimal inflation to reduce inequality," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 24, pages 79-94, March.
    16. Carlsson, Mikael & Westermark, Andreas, 2016. "Labor market frictions and optimal steady-state inflation," Journal of Monetary Economics, Elsevier, vol. 78(C), pages 67-79.

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    More about this item

    Keywords

    Computing Ramsey steady states; Medium-scale DSGE models; Approximation welfare;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling

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