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Jordan ROULLEAU-PASDELOUP (National University of Singapore), “Analyzing Linear Rational Expectations models: the Method of Undetermined Markov States”

January 5, 2022 @ 12:15 pm - 1:30 pm

The Macroeconomics Seminar:
Time: 12:15 pm – 13:30 pm
Date:05th of January  2022

Room : 2045

Jordan ROULLEAU-PASDELOUP (National University of Singapore), “Analyzing Linear Rational Expectations models: the Method of Undetermined Markov States”

Abstract : I show that a class of Linear Rational Expectations models with one endogenous state variable can be represented as a three-state Markov chain. I develop a new solution method based on this representation. The method amounts to solving for a small number of Markov states and just one transition probability. Together with the persistence parameter for the exogenous shock, these three objects constitute sufficient statistics to compute many objects that have routinely been computed numerically: impulse response function, cumulative sum, present discount value multiplier. I apply these tools to the tractable HANK framework with sticky nominal wages developed in Broer et al (2020,2021).

 

Organizers:
Jean-Baptiste MICHAU (Polytechnique-CREST)

Sponsors:
CREST