Benigno, Gianluca; Benigno, Pierpaolo; Nisticò, Salvatore - C.E.P.R. Discussion Papers - 2011
This paper provides first and second-order approximation methods for the solution of non-linear dynamic stochastic …. The first-order approximation is consistent with a conditionally-linear model in which risk is still time-varying but has … second-order approximation of the solution, instead, is sufficient to get this role. Moreover, risk premia, evaluated using …