Semantic Scholar Open Access 2022 4 sitasi

The extended perturbation method: With applications to the New Keynesian model and the zero lower bound

M. M. Andreasen Anders F. Kronborg

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Abstrak

We introduce the extended perturbation method, which improves the accuracy of standard perturbation by reducing approximation errors under certainty equivalence. For the New Keynesian model with Calvo pricing, extended perturbation is more accurate than standard perturbation, which implies explosive dynamics because it omits the upper bound on inflation implied by this model. In contrast, extended perturbation enforces this bound and generates stable dynamics. We also show that extended perturbation can accurately solve a New Keynesian model that enforces the zero lower bound for the monetary policy rate by considering a smooth nonlinear modification of the standard Taylor rule.

Penulis (2)

M. M. Andreasen

Anders F. Kronborg

Format Sitasi

APA MLA BibTeX

Andreasen, M.M., Kronborg, A.F. (2022). The extended perturbation method: With applications to the New Keynesian model and the zero lower bound. https://doi.org/10.3982/qe1102

Akses Cepat

Lihat di Sumber doi.org/10.3982/qe1102

Informasi Jurnal

Tahun Terbit: 2022
Bahasa: en
Total Sitasi: 4×
Sumber Database: Semantic Scholar
DOI: 10.3982/qe1102
Akses: Open Access ✓