Sticky information models in Dynare

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Title: Sticky information models in Dynare
ISBN: 978-952-6699-08-0
Author: Verona, Fabio ; Wolters, Maik H.
Organization: Bank of Finland
Series: Bank of Finland Research Discussion Papers
ISSN: 1456-6184
Series year: 2013
Series number: 5/2013
Year of publication: 2013
Publication date: 5.5.2013
Published in: Published in Computational Economics, Volume 43, Issue 3, March 2014, Pages 357-370
DOI: 10.1007/s10614-013-9379-6
Pages: 20 s.
Keywords: mallit; makrotaloustiede; odotukset; informaatio; Dynare
Abstract: Macroeconomic models with sticky information include an infinite number of lagged expectations. Several authors have developed specialized solutions algorithms to solve these models under rational expectations. We demonstrate that it is also possible to implement this class of models in Dynare - a widely used software package for solving dynamic stochastic general equilibrium (DSGE) models. Using the Dynare macro language one can easily construct and change the required large number of lagged expectation terms. We assess the accuracy of simulations run with different truncation points for the lagged expectations terms and find that the solution is reasonably precise even for moderate truncation points. Keywords: sticky information, Dynare, macro-processor, lagged expectations

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