Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5098508 | Journal of Economic Dynamics and Control | 2014 | 34 Pages |
Abstract
I describe a tractable way to study macroeconomic quantities and asset prices in a large class of dynamic stochastic general equilibrium models. The proposed approximate solution is analytical, log-linear, and adjusted for risk. Therefore, it is well suited to investigate economic mechanisms, describe the time series properties or estimate the model, and deal with stochastic volatility. I explain the pitfalls encountered by previous attempts to use simple approximation techniques, in particular with models featuring recursive preferences. Finally, I show the theoretical relationship between my solution and higher-order perturbation methods.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Aytek Malkhozov,