This paper presents stochastic simulations of a non-linear Phillips curve model with a random shock on the labor market, a random shock on inflation, and 20 state variables to represent a rather complex dynamical adjustment. Various methods are used to perform the simulations: two approaches to parameterized-expectations and a high-order Taylor expansion. The effects of non-linearity are then evaluated by a comparison with a linearized version of the model.
More papers in Computing in Economics and Finance 1999 from Society for Computational Economics Address: CEF99, Boston College, Department of Economics, Chestnut Hill MA 02467 USA Contact information at EDIRC. Series data maintained by Christopher F. Baum ().