Can I use Dynare to solve nonrational expectation model

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Can I use Dynare to solve nonrational expectation model

Postby apple564564 » Wed Jun 16, 2010 3:23 pm

I am simulating a non-rational expectation model, which is formed by the lagged variables only. Can I just put a tiny coefficient on the forwad variables, so that I can get a approximation of my model results?
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Re: Can I use Dynare to solve nonrational expectation model

Postby SébastienVillemot » Tue Jun 22, 2010 10:43 am

Dynare can solve for the first order approximation of purely backward models like yours.

Second and third order approximation of such models are not yet implemented, they should be in the future.
Sébastien Villemot
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Re: Can I use Dynare to solve nonrational expectation model

Postby apple564564 » Fri Jun 25, 2010 12:33 pm

Thanks a lot, you help me a lot!!
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Re: Can I use Dynare to solve nonrational expectation model

Postby SébastienVillemot » Thu Aug 19, 2010 9:18 am

I forgot to mention, but of course such models can easily be solved without an approximation. You can solve them iteratively by using a non-linear solver at each period, going forward in time.
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