Perturbation Methods for Markov-Switching DSGE Models

Andrew Foerster, Juan F Rubio-Ramirez, Daniel Waggoner and Tao Zha

No 2013-22, Working Papers from FEDEA

Abstract: This paper develops a general perturbation methodology for constructing high-order approximations to the solutions of Markov-switching DSGE models. We introduce an important and practical idea of partitioning the Markov-switching parameter space so that a steady state is well de?ned. With this de?nition, we show that the problem of ?nding an approximation of any order can be reduced to solving a system of quadratic equations. We propose using the theory of Gröbner bases in searching all the solutions to the quadratic system. This approach allows us to obtain all the approximations and ascertain how many of them are stable. Our methodology is applied to three models to illustrate its feasibility and practicality.

Date: 2013-12
New Economics Papers: this item is included in nep-dge
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Citations: View citations in EconPapers (36)

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Related works:
Journal Article: Perturbation methods for Markov‐switching dynamic stochastic general equilibrium models (2016)
Working Paper: Perturbation methods for Markov-switching DSGE models (2014)
Working Paper: Perturbation Methods for Markov-Switching DSGE Models (2014)
Working Paper: Perturbation Methods for Markov-Switching DSGE Models (2013)
Working Paper: Perturbation methods for Markov-switching DSGE models (2013)
Working Paper: Perturbation methods for Markov-switching DSGE model (2013)
Working Paper: Perturbation Methods for Markov-Switching Models (2010)
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