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Exploiting Model Structure to Solve the Dynamics of a Macro Model

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  • Ric D. Herbert
  • Peter Stemp
  • Peter J. Stemp

Abstract

This paper considers alternative approaches to solving the time-path of a representative agent model following an exogenous shock. The model has a number of important dynamic properties that are both common to a wide range of economic models and have important computational implications for solving the model. The paper compares the alternative approaches on a computational basis and shows that the best approach to solving the model is obtained by fully exploiting the model structure in a modified reverse shooting algorithm.

Suggested Citation

  • Ric D. Herbert & Peter Stemp & Peter J. Stemp, 2000. "Exploiting Model Structure to Solve the Dynamics of a Macro Model," CESifo Working Paper Series 266, CESifo.
    • Handle: RePEc:ces:ceswps:_266
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    File URL: https://www.cesifo.org/DocDL/cesifo_wp266.pdf
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    References listed on IDEAS

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    3. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, April.
    4. Boucekkine, Raouf, 1995. "An alternative methodology for solving nonlinear forward-looking models," Journal of Economic Dynamics and Control, Elsevier, vol. 19(4), pages 711-734, May.
    5. Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-1311, July.
    6. Anderson, Gary & Moore, George, 1985. "A linear algebraic procedure for solving linear perfect foresight models," Economics Letters, Elsevier, vol. 17(3), pages 247-252.
    7. Matsuyama, Kiminori, 1987. "Current account dynamics in a finite horizon model," Journal of International Economics, Elsevier, vol. 23(3-4), pages 299-313, November.
    8. Zadrozny, Peter A., 1998. "An eigenvalue method of undetermined coefficients for solving linear rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 22(8-9), pages 1353-1373, August.
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    Cited by:

    1. Stemp, Peter J. & Herbert, Ric D., 2003. "Calculating short-run adjustments: Sensitivity to non-linearities in a representative agent framework," Journal of Economic Dynamics and Control, Elsevier, vol. 27(3), pages 357-379, January.

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