29.11.2019.

Generalised Impulse Response Function as a Perturbation of a Global Solution to DSGE Models

Working Paper 4/2019

Photo by: Latvijas Banka

ABSTRACT
In the conventional perturbation approach for solving DSGE models, the dynamics of the deviation of solutions from the steady state after a shock hitting an economy represents an impulse response function (IRF). A method to construct the IRF as a deviation from a deterministic global solution is proposed. The approach detects asymmetric reactions of an economy to shocks in different initial conditions. For example, in an economic downturn a negative shock might affect the economy more severely than in normal economic conditions. The method allows for constructing the IRF for highly nonlinear DSGE models.

Keywords: DSGE, perturbation, global solution, trend inflation

JEL codes: C62, D58, D84

APA: Ajevskis, V. (2020, 01. oct.). Generalised Impulse Response Function as a Perturbation of a Global Solution to DSGE Models. Taken from https://www.macroeconomics.lv/node/4672
MLA: Ajevskis, Viktors. "Generalised Impulse Response Function as a Perturbation of a Global Solution to DSGE Models" www.macroeconomics.lv. Tīmeklis. 01.10.2020. <https://www.macroeconomics.lv/node/4672>.
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