A General and Efficient Method for Solving Regime-Switching DSGE Models

Julien Albertini and Stéphane Moyen

Working Papers from HAL

Abstract: This paper provides a general representation of endogenous and threshold-based regime switching models and develops an efficient numerical solution method. The regime-switching is triggered endogenously when some variables cross threshold conditions that can themselves be regime-dependent. We illustrate our approach using a RBC model with state-dependent government spending policies. It is shown that regime-switching models involve strong non linearities and discontinuities in the dynamics of the model. However, our numerical solution based on simulation and projection methods with regime-dependent policy rules is accurate, and fast enough, to efficiently take into all these challenging aspects. Several alternative specifications to the model and the method are studied.

Keywords: Regime-switching; RBC model; simulation; accuracy (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-cmp and nep-dge
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03067554v1
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: A General and Efficient Method for Solving Regime-Switching DSGE Models (2024)
Working Paper: A General and Efficient Method for Solving Regime-Switching DSGE Models (2020)
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