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OccBin: A toolkit for solving dynamic models with occasionally binding constraints easily

Luca Guerrieri and Matteo Iacoviello

Journal of Monetary Economics, 2015, vol. 70, issue C, 22-38

Abstract: The toolkit adapts a first-order perturbation approach and applies it in a piecewise fashion to solve dynamic models with occasionally binding constraints. Our examples include a real business cycle model with a constraint on the level of investment and a New Keynesian model subject to the zero lower bound on nominal interest rates. Compared with a high-quality numerical solution, the piecewise linear perturbation method can adequately capture key properties of the models we consider. A key advantage of the piecewise linear perturbation method is its applicability to models with a large number of state variables.

Keywords: Occasionally binding constraints; DSGE models; Regime shifts; First-order perturbation (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (429)

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Working Paper: OccBin: A Toolkit for Solving Dynamic Models With Occasionally Binding Constraints Easily (2014) Downloads
Working Paper: OccBin: A Toolkit for Solving Dynamic Models With Occasionally Binding Constraints Easily (2014) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:70:y:2015:i:c:p:22-38

DOI: 10.1016/j.jmoneco.2014.08.005

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