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Linear–quadratic Solution Methods to Non‐linear Stochastic Models: A Note
Author(s) -
Roche Maurice J.
Publication year - 1998
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/1467-9957.00092
Subject(s) - quadratic equation , rational expectations , economics , linear model , mathematical economics , yield (engineering) , mathematical optimization , mathematics , econometrics , statistics , materials science , geometry , metallurgy
Linear–quadratic solution methods to non‐linear stochastic rational expectations models are described and compared. A closed economy real business cycle model is used as an illustration. Our results show that all methods yield identical coefficients in the optimal decision rules. However, when solving other models some methods require only a few modifications to existing computer programs.