OccBin: A Toolkit for Solving Dynamic Models With Occasionally Binding Constraints Easily

Matteo Iacoviello

No 801, 2014 Meeting Papers from Society for Economic Dynamics

Abstract: We describe how to adapt a first-order perturbation approach and apply it in a piecewise fashion to handle occasionally binding constraints in dynamic models. Our examples include a real business cycle model with a constraint on the level of investment, a New Keynesian model subject to the zero lower bound on nominal interest rates, and a model of optimal consumption choice in the presence of liquidity constraints. In each case, we compare the piecewise linear perturbation solution with a high-quality numerical solution that can be taken to be virtually exact. The piecewise linear perturbation method can adequately capture key properties of the models we consider. A key advantage of this method is its applicability to models with a large number of state variables.

Date: 2014
New Economics Papers: this item is included in nep-cmp, nep-dge and nep-mac
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Citations: View citations in EconPapers (18)

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Related works:
Journal Article: OccBin: A toolkit for solving dynamic models with occasionally binding constraints easily (2015)
Working Paper: OccBin: A Toolkit for Solving Dynamic Models With Occasionally Binding Constraints Easily (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed014:801

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