EconPapers    
Economics at your fingertips  
 

Solving linear DSGE models with structure-preserving doubling methods

Johannes Huber, Alexander Meyer-Gohde and Johanna Saecker

No 195, IMFS Working Paper Series from Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS)

Abstract: This paper applies structure preserving doubling methods to solve the matrix quadratic underlying the recursive solution of linear DSGE models. We present and compare two Structure-Preserving Doubling Algorithms (SDAs) to other competing methods - the QZ method, a Newton algorithm, and an iterative Bernoulli approach - as well as the related cyclic and logarithmic reduction algorithms. Our comparison is completed using nearly 100 different models from the Macroeconomic Model Data Base (MMB) and different parameterizations of the monetary policy rule in the medium scale New Keynesian model of Smets and Wouters (2007) iteratively. We find that both SDAs perform very favorably relative to QZ, with generally more accurate solutions computed in less time. While we collect theoretical convergence results that promise quadratic convergence rates to a unique stable solution, the algorithms may fail to converge when there is a breakdown due to singularity of the coefficient matrices in the recursion. One of the proposed algorithms can overcome this problem by an appropriate (re)initialization. This SDA also performs particular well in refining solutions of different methods or from nearby parameterizations.

Keywords: Numerical accuracy; DSGE; Solution methods (search for similar items in EconPapers)
JEL-codes: C61 C63 E17 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/280968/1/1877335320.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:imfswp:280968

Access Statistics for this paper

More papers in IMFS Working Paper Series from Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().

 
Page updated 2025-03-24
Handle: RePEc:zbw:imfswp:280968