Global DSGE Models

63 Pages Posted: 15 Apr 2020 Last revised: 3 Jun 2021

See all articles by Dan Cao

Dan Cao

Georgetown University - Department of Economics

Wenlan Luo

Tsinghua University - School of Economics & Management

Guangyu Nie

Shanghai University of Finance and Economics

Date Written: April 1, 2020

Abstract

We introduce our GDSGE framework and a novel global solution method, called simultaneous transition and policy function iterations (STPFIs), for solving dynamic stochastic general equilibrium models. The framework encompasses many well-known incomplete markets models with highly nonlinear dynamics such as models of financial crises and models with rare disasters including the current COVID-19 pandemic. Using consistency equations, our method is most effective at solving models featuring endogenous state variables with implicit laws of motion such as wealth or consumption shares. Finally, we incorporate this method in a publicly available toolbox that solves many important models in the aforementioned topics, and in many cases, more efficiently or accurately than their original algorithms.

Keywords: nonlinear DSGE models, incomplete markets, financial crises, rare disasters, global solution method, computation toolbox, implicit law-of-motions, consistency equations

JEL Classification: C62, C63, C68, D50, D90, E00, F30, F40, G01, G10

Suggested Citation

Cao, Dan and Luo, Wenlan and Nie, Guangyu, Global DSGE Models (April 1, 2020). Available at SSRN: https://ssrn.com/abstract=3569013 or http://dx.doi.org/10.2139/ssrn.3569013

Dan Cao (Contact Author)

Georgetown University - Department of Economics ( email )

Washington, DC 20057
United States

Wenlan Luo

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

Guangyu Nie

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, Shanghai 200433
China

HOME PAGE: http://www.nieguangyu.wixsite.com/econ

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