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Solving and Estimating Indeterminate DSGE Models, Roger Farmer, Vadim Khramov

Contributor
Abstract
We propose a method for solving and estimating linear rational expectations models that exhibit indeterminacy and we provide step-by-step guidelines for implementing this method in the Matlab-based packages Dynare and Gensys. Our method redefines a subset of expectational errors as new fundamentals. This redefinition allows us to treat indeterminate models as determinate and to apply standard solution algorithms. We provide a selection method, based on Bayesian model comparison, to decide which errors to pick as fundamental and we present simulation results to show how our procedure works in practice
Table Of Contents
""Cover""; ""Solving and Estimating Indeterminate DSGE Models""; ""Abstract""; ""1 Introduction""; ""2 Related Literature""; ""3 Solving LRE Models""; ""3.1 The QZ Decomposition""; ""3.2 Using the QZ decomposition to solve the model""; ""3.3 The Indeterminate Case""; ""4 Choice of Expectational Errors""; ""5 Example: A Simple New-Keynesian Model""; ""5.1 The Determinate Case""; ""5.2 The Indeterminate Case""; ""6 Implementing our Procedure in Dynare""; ""7 A Model Selection Criterion""; ""8 Conclusion""; ""Appendix A""; ""References""
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (31 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9781484342657

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