Solution and Estimation of RE Macromodels with Optimal Policy

Paul Söderlind

No 256, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: Macro models of monetary policy typically involve forward looking behavior. Except in rare circumstances, we have to apply some numerical method to find the the optimal policy and the rational expectations equilibrium. This paper summarizes a few useful methods, and shows how they can be combined with a Kalman filter to estimate the deep model parameters with maximum likelihood. Simulations of a macro model with staggered price setting, interest rate elastic output, and optimal monetary policy illustrate the properties of this estimation approach.

Keywords: Unstable roots; Schur decomposition; Kalman filter estimation (search for similar items in EconPapers)
JEL-codes: C32 C61 E52 (search for similar items in EconPapers)
Pages: 12 pages
Date: 1998-09-07
New Economics Papers: this item is included in nep-dge and nep-ecm
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Citations: View citations in EconPapers (7)

Published in European Economic Review, 1999, pages 813-823.

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Journal Article: Solution and estimation of RE macromodels with optimal policy (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:hastef:0256

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