Estimation of non-linear DSGE models made easy: taking second-order model approximations to the data (with an application to a DSGE model with a banking sector)
Robert Kollmann ()
No 1255, 2013 Meeting Papers from Society for Economic Dynamics
I provide an application of the method by estimating a non-linear DSGE model of an economy with a banking sector that faces a collateral constraint. In this setting, bank capital is a key state variable. The economy exhibits an important non-linearity, as negative shocks to bank capital have a much more detrimental effect on real activity when the health of the banking sector is poor, than when banks are well-capitalized. Estimates of the non-linear model, based on the novel method here, suggest that this non-linearity is quantitatively powerful in US and Euro Area data.
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed013:1255
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More papers in 2013 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
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