Dynamic Perturbation *

  title={Dynamic Perturbation *},
  author={Alessandro Mennuni and Serhiy Stepanchuk},
We develop a new algorithm to solve large scale dynamic stochastic general equilibrium models over a large transition. The method consists of Taylor expanding the equilibrium conditions of the model not just around the steady state, but along the entire equilibrium path. The method can be applied to a broad class of models and is orders of magnitudes more accurate than solutions based on local perturbation of the steady state. We also demonstrate that our method can solve models with a much… CONTINUE READING

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