NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Vadim Khramov

Bank of America Merrill Lynch
2 King Edward Street
London, EC1A 1HQ
United Kingdom

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NBER Working Papers and Publications

September 2013Solving and Estimating Indeterminate DSGE Models
with Roger E.A. Farmer, Giovanni Nicolò: w19457
We propose a method for solving and estimating linear rational expectations models that exhibit indeterminacy and we provide step-by-step guidelines for implementing this method in the Matlab-based packages Dynare and Gensys. Our method redefines a subset of expectational errors as new fundamentals. This redefinition allows us to treat indeterminate models as determinate and to apply standard solution algorithms. We prove that our method is equivalent to the solution method proposed by Lubik and Schorfheide (2003, 2004), and using the New-Keynesian model described in Lubik and Schorfheide (2004), we demonstrate how to apply our theoretical results with a practical exercise.

Published: Farmer, Roger E.A. & Khramov, Vadim & Nicolò, Giovanni, 2015. "Solving and estimating indeterminate DSGE models," Journal of Economic Dynamics and Control, Elsevier, vol. 54(C), pages 17-36. citation courtesy of

 
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