An OLS approach to computing Ramsey equilibria in medium-scale macroeconomic models

This note describes a general procedure for solving for the steady state and the dynamics implied by the Ramsey equilibrium of medium-scale macroeconomic models. The procedure yields an exact numerical solution for the steady state and second-order accurate dynamics. It introduces a novel projection...

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Bibliographic Details
Published in:Economics letters 2012-04, Vol.115 (1), p.128-129
Main Authors: Schmitt-Grohé, Stephanie, Uribe, Martín
Format: Article
Language:English
Subjects:
Approximation welfare
Computational methods
Computing Ramsey steady states
Economic models
Equilibrium
Macroeconomics
Medium-scale DSGE models
Numerical analysis
Studies
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Summary:This note describes a general procedure for solving for the steady state and the dynamics implied by the Ramsey equilibrium of medium-scale macroeconomic models. The procedure yields an exact numerical solution for the steady state and second-order accurate dynamics. It introduces a novel projection-based approach to calculating exact solutions to the steady state of Ramsey equilibria. ► Computation of Ramsey steady state with an OLS approach. ► Exact solution to Ramsey steady state by use of projection method. ► Approximation of Ramsey dynamics. ► Approximation of Welfare in the Ramsey equilibrium.
ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2011.12.019