Solution Strategies of Dynamic Stochastic General Equilibrium (DSGE) models

Alali, Walid Y. (2009): Solution Strategies of Dynamic Stochastic General Equilibrium (DSGE) models.

Abstract

DSGE models are the main tool for analysing various questions in problems of monetary, business cycle theory and fiscal policy problems, growth and other fields in international macroeconomics and macroeconomics. Many macroeconomic publications use the DSGE framework. A consensus has been reached on the methodology for using such kind of model. The resolution of DSGE models remains an area of ongoing interest. This paper provides an overview of the available solution techniques. Linear approximation methods and perturbation methods have been explored in detail. Solving strategies such as the eigenvalue auto-decomposition of Blanchard and Kahn (1980) or the method of indefinite coefficients are explained. A Bayesian estimate is drawn shortly. The evaluation methods are briefly described. Finally, the paper provides some useful resources for practical implementation.

• Item Type: MPRA Paper
• Language: English
• Keywords: DSGE models, solution strategies, Blanchard-Kahn conditions, perturbation methods, practical implementation
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C63 - Computational Techniques ; Simulation Modeling; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C68 - Computable General Equilibrium Models; C - Mathematical and Quantitative Methods > C8 - Data Collection and Data Estimation Methodology ; Computer Programs > C88 - Other Computer Software

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