Global GDSGE Models

Dan Cao (), Wenlan Luo and Guangyu Nie

Review of Economic Dynamics, 2023, vol. 51, 199-225

Abstract: We introduce our GDSGE framework and a novel global solution method, called simultaneous transition and policy function iterations (STPFIs), for solving dynamic stochastic general equilibrium models. The framework encompasses many well-known incomplete markets models with highly nonlinear dynamics such as models of financial crises and models with rare disasters including the current COVID-19 pandemic. Using consistency equations, our method is most effective at solving models featuring endogenous state variables with implicit laws of motion such as wealth or consumption shares. Finally, we incorporate this method in an automated and publicly available toolbox that solves many important models in the aforementioned topics, and in many cases, more efficiently and/or accurately than their original algorithms. (Copyright: Elsevier)

Keywords: nonlinear DSGE models; incomplete markets; financial crises; rare disasters; portfolio choices; occasionally binding constraints (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1016/j.red.2023.01.001

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