Arbeitspapier
Solving linear DSGE models with Newton methods
This paper presents and compares Newton-based methods from the applied mathematics literature for solving the matrix quadratic that underlies the recursive solution of linear DSGE models. The methods are compared using nearly 100 different models from the Macroeconomic Model Data Base (MMB) and different parameterizations of the monetary policy rule in the medium-scale New Keynesian model of Smets and Wouters (2007) iteratively. We find that Newton-based methods compare favorably in solving DSGE models, providing higher accuracy as measured by the forward error of the solution at a comparable computation burden. The methods, however, suffer from their inability to guarantee convergence to a particular, e.g. unique stable, solution, but their iterative procedures lend themselves to refining solutions either from different methods or parameterizations.
- Language
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Englisch
- Bibliographic citation
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Series: IMFS Working Paper Series ; No. 174
- Classification
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Wirtschaft
Optimization Techniques; Programming Models; Dynamic Analysis
Computational Techniques; Simulation Modeling
General Aggregative Models: Forecasting and Simulation: Models and Applications
- Subject
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Numerical accuracy
DSGE
Solution methods
- Event
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Geistige Schöpfung
- (who)
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Meyer-Gohde, Alexander
Saecker, Johanna
- Event
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Veröffentlichung
- (who)
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Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS)
- (where)
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Frankfurt a. M.
- (when)
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2022
- Handle
- Last update
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10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Meyer-Gohde, Alexander
- Saecker, Johanna
- Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS)
Time of origin
- 2022
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Efficient Perturbation Methods for Solving Regime-Switching DSGE Models
Projection methods for solving large linear systems
DSGE Nash: Solving Nash games in macro models
Solving DSGE models with a nonlinear moving average
Solving DSGE portfolio choice models with asymmetric countries