Semi-Global Solutions to DSGE Models: Perturbation around a Deterministic Path

Viktors Ajevskis ()

No 44, Dynare Working Papers from CEPREMAP

Abstract: This study presents an approach based on a perturbation technique to construct global solutions to dynamic stochastic general equilibrium models (DSGE). The main idea is to expand a solution in a series of powers of a small parameter scaling the uncertainty in the economy around a global solution to the deterministic model, i.e. the model where the volatility of the shocks vanishes. Under the assumption that a deterministic path is already known the higher order terms in the expansion are obtained recursively by solving linear rational expectations models with time-varying parameters. The present work proposes a method based on backward recursion for solving this type of models. The conditions under which the solutions exist are found.

Keywords: DSGE; perturbation; rational expectations; time-varying parameters; backward induction (search for similar items in EconPapers)
JEL-codes: C62 D58 D84 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2015-05
New Economics Papers: this item is included in nep-dge and nep-ore
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https://www.dynare.org/wp-repo/dynarewp044.zip Source code of programs used in the paper (application/zip)

Related works:
Journal Article: Semi-global solutions to DSGE models: perturbation around a deterministic path (2017)
Working Paper: Semi-Global Solutions to DSGE Models: Perturbation around a Deterministic Path (2015)
Working Paper: Semi-Global Solutions to DSGE Models: Perturbation around a Deterministic Path (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:cpm:dynare:044

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