Exact Expectations: Efficient Calculation of DSGE Models

Fabian Goessling ()
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Fabian Goessling: University of Münster

Computational Economics, 2019, vol. 53, issue 3, No 4, 977-990

Abstract: Abstract Global solution methods for dynamic stochastic general equilibrium models are accurate but computationally expensive. In particular, evaluating conditional expectations at numerous points in the state-space leads to significant computational complexity. In the paper at hands, I show how to remove the majority of calculations required for the evaluation of conditional expectations. Therefore, I replace the approximated integrals obtained by e.g. quadrature rules with an analytic expression. I provide a general framework and carry out the approach in detail using Chebyshev basis functions. Subsequently, I adapt the exact expectations technique to the neoclassical model with recursive utility, labor choice and student-t shocks to log-productivity.

Keywords: Projection; Precomputation; DSGE; Complexity reduction; C63; C68 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s10614-017-9780-7

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