【RIEM Seminar Series No.267】Nonlinear Solutions to DSGE Models and Parameter Stability
Title: Nonlinear Solutions to DSGE Models and Parameter Stability Speaker: Chuanqi Zhu, Lingnan College, Sun-Yat-sen University Host: Guo Mengmeng, Associate professor, RIEM Time: 14:30-16:00, Apr. 17, Friday Venue: Yide Building H503, Liulin Campus Abstract: This paper focuses on the parameter stability of dynamic stochastic general equilibrium (DSGE) models. To this end, I solve and estimate a representative New Keynesian model using both linear and nonlinear methods. I first examine how nonlinearities a_ect the parameter stability of the New Keynesian model. The results show that parameter instabilities still exist even using nonlinear solutions, and also highlight differences between two nonlinear solution methods: perturbation method and projection method. In addition, I propose a sequential procedure for searching for multiple structural breaks in nonlinear models, and apply it to the New Keynesian model. Two common structural breaks among these estimated parameters are identified for all the solutions considered in this paper. One structural break is in the early 1970s, while another one locates around the middle 1990s.
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