In this paper I derive the matrix chain rules for solving a second and a third-order approximation to a DSGE model that allow the use of a recursive Sylvester equation solution method. In particular I use the solution algorithms of Kamenik (2005) and Martin & Van Loan (2006) to solve the...

The benefit from using second-order approximations tostochastic dynamic rational expec- tations models is explained. By example of the neoclassical growth model, this note as- sesses the accuracy of the obtained approximation. The implications for optimal policy are discussed.

This paper shows the inappropriatedness of approximation procedures for welfare rankings across suboptimal policy strategies. On the grounds of a simple general equilibrium model, we find that even commonly accepted techniques are not suitable to achieve accurate welfare orderings. This result...

The benefit from using second-order approximations tostochastic dynamic rational expec- tations models is explained. By example of the neoclassical growth model, this note as- sesses the accuracy of the obtained approximation. The implications for optimal policy are discussed.

This paper develops a novel approach for estimating latent state variables of Dynamic Stochastic General Equilibrium (DSGE) models that are solved using a second-order accurate approximation. I apply the Kalman filter to a state-space representation of the second-order solution based on the...

Phenomena such as the Great Moderation have increased the attention of macroeconomists towards models where shock processes are not (log-)normal. This paper studies a class of discrete-time rational expectations models where the variance of exogenous innovations is subject to stochastic regime...

This paper presents an algorithm to solve up to the second order of approximation rational expectations models with informational subperiods, and provides simple examples to demonstrate how the algorithm works. Copyright Springer Science+Business Media New York 2013

This paper studies the welfare consequences of exogenous variations in trend inflation in a New Keynesian economy. Consumption and leisure respond asymmetrically to a rise and a decline in trend inflation. As a result, an increase in the variance of shocks to the trend inflation process...

This paper shows the inappropriatedness of approximation procedures for welfare rankings across suboptimal policy strategies. On the grounds of a simple general equilibrium model, we find that even commonly accepted techniques are not suitable to achieve accurate welfare orderings. This result...

This paper shows how to compute a second-order accurate solution of a non-linear rational expectation model using algorithms developed for the solution of linear rational expectation models. This result is a state-space representation for the realized values of the variables of the model. This...