CEIS-Tor Vergata is pleased to inform you that, on Friday April 19th, 2013 at 12.00 pm, prof. Michel Juillard (Banque of France) will present a paper on “The Stochastic Extended Path Approach” ABSTRACT The Extended Path (EP) approach is known to provide a simple and fairly accurate solution to large scaled nonlinear models. The main drawback of the EP approach is that the Jensen inequality is neglected, because future shocks are (deterministically) set to their expected value of zero. Previous contributions shown that the cost of this approximation is small compared to the cost of neglecting the deterministic nonlinearities. But the accuracy errors are significantly increased in the presence of binding constraints (such as a Zero Lower Bound on nominal interest rates). In this paper we propose a simple extension to the EP approach by considering that the structural innovations in t+1 are non zero and keeping the innovations in t+s (s>1) equal to their expected value of zero. We use a quadrature approach to compute the expectations under this assumption. We evaluate the accuracy of the Stochastic Extended Path approach on a Real Business Cycle model. The computing time of this approach is polynomial in the number of endogenous variables but exponential with respect to the number of structural innovations. The Seminar will be held at the Faculty of Economics, University of Rome "Tor Vergata", B-building, 1° floor, room B Please, go to www.ceistorvergata.it for the complete list of seminars and events at CEIS. How to reach us: http://web.uniroma2.it/mobilita/index.html http://www.economia.uniroma2.it/area.asp?a=867 Barbara Piazzi __________ Informazioni da ESET NOD32 Antivirus, versione del database delle firme digitali 8229 (20130415) __________ Il messaggio è stato controllato da ESET NOD32 Antivirus. www.nod32.it |
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