Saddle cycles: Solving rational expectations models featuring limit cycles (or chaos) using perturbation methods

Artikel

Unlike linear ones, nonlinear business cycle models can generate sustained fluctuations even in the absence of shocks (e.g., via limit cycles/chaos). A popular approach to solving nonlinear models is perturbation methods. I show that, as typically implemented, these methods are incapable of finding solutions featuring limit cycles or chaos. Fundamentally, solutions are only required not to explode, while standard perturbation algorithms seek solutions that meet the stronger requirement of convergence to the steady state. I propose a modification to standard algorithms that does not impose this overly strong requirement.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Quantitative Economics ; ISSN: 1759-7331 ; Volume: 12 ; Year: 2021 ; Issue: 3 ; Pages: 869-901 ; New Haven, CT: The Econometric Society

Classification and Topics

• Classification: Wirtschaft ; Computational Techniques; Simulation Modeling ; Computable General Equilibrium Models ; Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications
• Subject: chaos ; computational methods ; Dynamic equilibrium economies ; limit cycles ; nonlinear solution methods

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Galizia, Dana
• Event: Veröffentlichung
• (who): The Econometric Society
• (where): New Haven, CT
• (when): 2021

Further information

• DOI: doi:10.3982/QE1491
• Handle: http://hdl.handle.net/10419/253600
• Last update: 10.03.2025, 11:42 AM CET