Determining Short-Run Adjustments: Sensitivity to Non-Linearities in a Representative Agent Framework

Peter J. Stemp () and Ric D. Herbert ()
Additional contact information
Peter J. Stemp: University of Melbourne
Ric D. Herbert: University of Western Sydney

No 253, Computing in Economics and Finance 1999 from Society for Computational Economics

Abstract: Two common properties of macroeconomic models are saddle-path instability and the existence of non-linearities. Under these circumstances, a common approach is to make analysis more tractable by linearising the model in the neighbourhood of an appropriate steady-state. The linearised model is then employed to calculate short-run adjustments following exogenous shocks. This can lead to results that differ from those derived from the correct (non-linear) model. In this paper, we investigate the magnitude of errors arising as a consequence of using a linear approximation to a well-known representative agent model. We do this by taking a calibrated version of the Matsuyama (1987) model of a small open economy.

Date: 1999-03-01
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
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:sce:scecf9:253

Access Statistics for this paper

More papers in Computing in Economics and Finance 1999 from Society for Computational Economics CEF99, Boston College, Department of Economics, Chestnut Hill MA 02467 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum ().