Computing DSGE Models with Recursive Preferences
Dario Caldara,
Jesus Fernandez-Villaverde,
Juan F Rubio-Ramirez and
Wen Yao
PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania
Abstract:
This paper compares different solution methods for computing the equilibrium of dynamic stochastic general equilibrium (DSGE) models with recursive preferences such as those in Epstein and Zin (1989 and 1991). Models with these preferences have recently become popular, but we know little about the best ways to implement them numerically. To fill this gap, we solve the stochastic neoclassical growth model with recursive preferences using four different approaches: second and third-order perturbation, Chebyshev polynomials, and value function iteration. We document the performance of the methods in terms of computing time, implementation complexity, and accuracy. Our main finding is that a third-order perturbation is competitive in terms of accuracy with Chebyshev polynomials and value function iteration, while being an order of magnitude faster to run. Therefore, we conclude that perturbation methods are an attractive approach for computing this class of problems.
Keywords: DSGE Models; Recursive Preferences; Perturbation (search for similar items in EconPapers)
JEL-codes: C63 C68 E37 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2009-05-25
New Economics Papers: this item is included in nep-cmp and nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)
Downloads: (external link)
https://economics.sas.upenn.edu/sites/default/file ... ng-papers/09-018.pdf (application/pdf)
Related works:
Working Paper: Computing DSGE Models with Recursive Preferences (2009) 
Working Paper: Computing DSGE Models with Recursive Preferences (2009) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:pen:papers:09-018
Access Statistics for this paper
More papers in PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania 133 South 36th Street, Philadelphia, PA 19104. Contact information at EDIRC.
Bibliographic data for series maintained by Administrator ().