03.07.2014.

# Semi-Global Solutions to DSGE Models: Perturbation around a Deterministic Path

• #### Viktors Ajevskis

Economist, Latvijas Banka

1/2014

Abstract: This study presents an approach based on a perturbation technique to construct global solutions to dynamic stochastic general equilibrium models (DSGE). The main idea is to expand a solution in a series of powers of a small parameter scaling the uncertainty in the economy around a solution to the deterministic model, i.e. the model where the volatility of the shocks vanishes. If a deterministic path is global in state variables, then so are the constructed solutions to the stochastic model, whereas these solutions are local in the scaling parameter. Under the assumption that a deterministic path is already known the higher order terms in the expansion are obtained recursively by solving linear rational expectations models with time-varying parameters. The present work proposes a method which rests on backward recursion for solving this type of models.

JEL codes: C61, C62, C63, D50, D58

APA: Ajevskis, V. (2020, 01. oct.). Semi-Global Solutions to DSGE Models: Perturbation around a Deterministic Path. Taken from https://www.macroeconomics.lv/node/2590
MLA: Ajevskis, Viktors. "Semi-Global Solutions to DSGE Models: Perturbation around a Deterministic Path" www.macroeconomics.lv. Tīmeklis. 01.10.2020. <https://www.macroeconomics.lv/node/2590>.