Calculating and Using Second Order Accurate Solutions of Discrete Time

By Jinill Kim, Sunghyun Kim, Ernst Schaumburg, Christopher A. Sims. 2003

269 citations recorded by the source corpus.

We describe an algorithm for calculating second order approximations to the solutions to nonlinear stochastic rational expectations models. The paper also explains methods for using such an approximate solution to generate forecasts, simulated time paths for the model, and evaluations of expected welfare differences across different versions of a model. The paper gives conditions for local validity of the approximation that allow for disturbance distributions with unbounded support and allow for non-stationarity of the solution process.

Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/9047c19812cc4a14f1274147efa7ed977f067fa4

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Citations in the corpus

Financial Frictions, Financial Integration and the International Propagation of Shocks (2011, unknown): “Notice also that including a variable portfolio did not a ect the results Second order responses are produced using the solution suggested by Lombardo and Sutherland (2007) and Kim et al. (2008) and implemented for Dynare by Stephan Fahr Notice that premia are constant up to second order.”
The Yield Curve and Macroeconomic Dynamics (2008, unknown): “1 � ( 23 ) which is obviously positive when �3 (1 + 2�)�2 5 6� �2 � � + 1 �2 � > 0. Once”
House Price Momentum and Strategic Complementarity (2018, methodology): “, 2013) using a log-quadratic approximation pruning higher-order terms as in Kim et al. (2008) around a steady state described in Appendix E in which ut = 0 8 t.”
Level and Volatility Factors in Macroeconomic Data (2017, unknown): “2 See, for example, Schmitt-Grohe and Uribe (2004) , Kim et al. (2008) , Bloom (2009) , Fernández-Villaverde et al. (2011) , Fernandez-Villaverde et al. (2015) , Jurado et al. (2015) and references there in. http://dx.doi.org/10.1016/j.jmoneco.2017.09.004 0304-3932/© 2017 Elsevier B.V.”
On Measuring the Effects of Fiscal Policy in Recessions (2011, unknown): “Sims (1980) and Eric M.”
Optimal Operational Monetary Policy in the Christiano-Eichenbaum-Evans Model of the U.S. Business Cycle (2004, unknown): “For further discussion of this issue, see Kim et al., 2003.”
Optimal interest rate rules, asset prices, and credit frictions (2005, background): “As emphasized by Kim et al. (2003) and Schmitt-Grohé and Uribe (2006), this strategy requires that an accurate evaluation of welfare be based on a higher order approximation of all the conditions that characterize the competitive equilibrium of the economy.”
Estimating Dynamic Equilibrium Economies: Linear versus Nonlinear Likelihood (2005, background): “It has been argued (for example Kim et al., 2003) that this linear solution is likely to be accurate enough for fitting the model to the data.”