2015/06/08 by Viktors Ajevskis, Ajevskis, Viktors
Economics, Econometrics and Finance · #Climate Change Policy and Economics #Computational Finance (q-fin.CP) #Dynamical Systems (math.DS) #Economic theories and models #FOS: Economics and business #FOS: Mathematics #General Economics (econ.GN) #Monetary Policy and Economic Impact
paper · pdf · doi:10.48550/arxiv.1506.02522
openalex publication_date 2015/06/08 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
This study proposes an approach based on a perturbation technique to\nconstruct global solutions to dynamic stochastic general equilibrium models\n(DSGE). The main idea is to expand a solution in a series of powers of a small\nparameter scaling the uncertainty in the economy around a solution to the\ndeterministic model, i.e. the model where the volatility of the shocks\nvanishes. If a deterministic path is global in state variables, then so are the\nconstructed solutions to the stochastic model, whereas these solutions are\nlocal in the scaling parameter. Under the assumption that a deterministic path\nis already known the higher order terms in the expansion are obtained\nrecursively by solving linear rational expectations models with time-varying\nparameters. The present work also proposes a method rested on backward\nrecursion for solving general systems of linear rational expectations models\nwith time-varying parameters and determines the conditions under which the\nsolutions of the method exist.\n