Generalised Impulse Response Function as a Perturbation of a Global Solution to DSGE Models

Viktors Ajevskis ()

No 2019/04, Working Papers from Latvijas Banka

Abstract: In the conventional perturbation approach for solving DSGE models, the dynamics of the deviation of solutions from the steady state after a shock hitting an economy represents an impulse response function (IRF). A method to construct the IRF as a deviation from a deterministic global solution is proposed. The approach detects asymmetric reactions of an economy to shocks in different initial conditions. For example, in an economic downturn a negative shock might affect the economy more severely than in normal economic conditions. The method allows for constructing the IRF for highly nonlinear DSGE models.

Keywords: DSGE; perturbation; global solution; trend inflation (search for similar items in EconPapers)
JEL-codes: C54 E32 E52 E58 (search for similar items in EconPapers)
Date: 2019-11-29
New Economics Papers: this item is included in nep-dge, nep-mac and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:ltv:wpaper:201904

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