Higher-Order Perturbation Solutions to Dynamic, Discrete-Time Rational Expectations Models: Methods and an Application to Optimal Monetary Policy

Eric Thomas Swanson (), Gary Anderson and Andrew Theo Levin ()

No 146, Computing in Economics and Finance 2005 from Society for Computational Economics

Abstract: We present an algorithm and software routines for computing nth-order approximate solutions to dynamic, discrete-time rational expectations models around a nonstochastic steady state. We apply these routines to investigate the optimal monetary policy with commitment in an optimizing-agent model with nominal price rigidities, subject to a fiscal policy that is stochastic, suboptimal, and exogenous to the central bank

Keywords: perturbation methods; Mathematica; nth order; optimal monetary policy (search for similar items in EconPapers)
JEL-codes: C61 C63 E37 (search for similar items in EconPapers)
Date: Written 2005-11-11

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