Macroeconomics and Trade seminar series | Solving DSGE Models Without a Law of Motion: An Ergodicity-Based Method and an Application by Hanbaek Lee – School of Economics Macroeconomics and Trade seminar series | Solving DSGE Models Without a Law of Motion: An Ergodicity-Based Method and an Application by Hanbaek Lee – School of Economics

Macroeconomics and Trade seminar series | Solving DSGE Models Without a Law of Motion: An Ergodicity-Based Method and an Application by Hanbaek Lee

Invites you to a

Macroeconomics and Trade seminar presented by

Hanbaek Lee

(University of Tokyo)

Solving DSGE Models Without a Law of Motion: An Ergodicity-Based Method and an Application

 

Wednesday 1 March

2.00pm – 3.30pm

Via Zoom: Meeting Link

This paper develops a novel method to solve dynamic stochastic general equilibrium models globally and accurately without specifying the law of motion. The method is based on the ergodic theorem: if a simulated path of the aggregate shock is long enough, all the possible equilibrium allocations are realized somewhere on the path. Then, the rationally expected future value function at each period on the path can be completely characterized by identifying the periods with each possible future state realization and by combining the corresponding time-specific value functions. The method provides an accurate solution even for models with highly nonlinear aggregate fluctuations. I apply this method to a heterogeneous-firm business cycle model with the corporate saving glut where the aggregate corporate cash stocks nonlinearly fluctuate. This nonlinearity leads to the state-dependent sensitivity of consumption to a TFP shock through the corporate dividend channel.

For further information contact:
Macroeconomics and Trade seminar series coordinator Dr James Graham (james.a.graham@sydney.edu.au)

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Date

Mar 01 2023
Expired!

Time

2:00 pm - 3:30 pm

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