NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Andrew Foerster

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Working Papers

August 2014Perturbation Methods for Markov-Switching DSGE Models
with Juan Rubio-Ramírez, Daniel F. Waggoner, Tao Zha: w20390
Markov-switching DSGE (MSDSGE) modeling has become a growing body of literature on economic and policy issues related to structural shifts. This paper develops a general perturbation methodology for constructing high-order approximations to the solutions of MSDSGE models. Our new method, called "the partition perturbation method,'' partitions the Markov-switching parameter space to keep a maximum number of time-varying parameters from perturbation. For this method to work in practice, we show how to reduce the potentially intractable problem of solving MSDSGE models to the manageable problem of solving a system of quadratic polynomial equations. We propose to use the theory of Gröbner bases for solving such a quadratic system. This approach allows us to first obtain all the solutions and t...
October 2008Sectoral vs. Aggregate Shocks: A Structural Factor Analysis of Industrial Production
with Pierre-Daniel G. Sarte, Mark W. Watson: w14389
This paper uses factor analytic methods to decompose industrial production (IP) into components arising from aggregate shocks and idiosyncratic sector-specific shocks. An approximate factor model finds that nearly all (90%) of the variability of quarterly growth rates in IP are associated with common factors. Because common factors may reflect sectoral shocks that have propagated by way of input-output linkages, we then use a multisector growth model to adjust for the effects of these linkages. In particular, we show that neoclassical multisector models, of the type first introduced by Long and Plosser (1983), produce an approximate factor model as a reduced form. A structural factor analysis then indicates that aggregate shocks continue to be the dominant source of variation in IP, but th...

Published: Sectoral vs. Aggregregate Shocks: A Structural Factor Analysis of Industrial Production (with Andrew Foerster and Pierre-Danieal Sarte) Journal of Political Economy, Vol. 119, No. 1 (February 2011), pp 1-38

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