The deterministic extended-path (EP) method for solving dynamic stochastic optimisation problems approximates conditional expectations instead of approximating a model's complex non-linear dynamics. For a benchmark real business cycle model we show that this straightforward approach provides...

The costs of inflation are assessed using an endogenous growth macroeconomic model in which money reduces the time-costs of transacting. Inflation reduces growth in the model, which supports recent empirical evidence. Although simulations show time-costs to be small, inflation raises these costs...