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Solving the Diamond–Mortensen–Pissarides model: A hybrid perturbation approach

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  • Hänsel, Matthias

Abstract

Projection methods are deemed necessary to accurately solve various variants of the Diamond–Mortensen–Pissarides model used in business cycle research. This paper argues that hybrid perturbation, once combined with a non-linear change of variable, can provide an alternative, producing accurate solutions while retaining most of the simplicity of standard perturbation: Applying the method to the Hagedorn and Manovskii (2008) model, it delivers high accuracy and nearly identical business cycle moments as recent projection approaches.

Suggested Citation

  • Hänsel, Matthias, 2024. "Solving the Diamond–Mortensen–Pissarides model: A hybrid perturbation approach," Economics Letters, Elsevier, vol. 236(C).
    • Handle: RePEc:eee:ecolet:v:236:y:2024:i:c:s0165176524001046
    DOI: 10.1016/j.econlet.2024.111621
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    References listed on IDEAS

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    Cited by:

    1. Francesco Del Prato & Marc Fleurbaey, 2024. "Workers as Partners: a Theory of Responsible Firms in Labor Markets," PSE Working Papers halshs-04788058, HAL.
    2. Francesco Del Prato & Marc Fleurbaey, 2024. "Workers as Partners: a Theory of Responsible Firms in Labor Markets," Papers 2411.05567, arXiv.org, revised Nov 2024.

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    More about this item

    Keywords

    Numerical methods; Search frictions; Unemployment; Hybrid perturbation; Business cycles;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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