A toolkit for analyzing nonlinear dynamic stochastic models easilyHarald Uhlig () No 97, Discussion Paper from Tilburg University, Center for Economic Research Abstract: Often, researchers wish to analyze nonlinear dynamic discrete-time stochastic models. This paper provides a toolkit for solving such models easily, building on log-linearizing the necessary equations characterizing the equilibrium and solving for the recursive equilibrium law of motion with the method of undetermined coefficients. This paper contains nothing substantially new. Instead, the paper simplifies and unifies existing approaches to make them accessible for a wide audience, showing how to log-linearizing the nonlinear equations without the need for explicit differentiation, how to use the method of undetermined coefficients for models with a vector of endogenous state variables, to provide a general solution by characterizing the solution with a matrix quadratic equation and solving it, and to provide frequency-domain techniques to calculate the second Since the method is an Euler-equation based approach rather than an approach based on solving a social planners problem, models with externalities or distortionary taxation do not pose additional problems. MATLAB programs to carry out the calculations in this paper are made available. This paper should be useful for researchers and Ph.D. students alike. Keywords: Stochastic; Models (search for similar items in EconPapers) Downloads: (external link) Related works: Access Statistics for this paper More papers in Discussion Paper from Tilburg University, Center for Economic Research |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
Econpapers is hosted by the
Swedish Business School at Örebro University.