Sufficient Conditions for Finite Objective Functions in DSGE Models with Deterministic and Stochastic Trends

32 Pages Posted: 27 Feb 2008 Last revised: 1 Oct 2009

See all articles by Martin M. Andreasen

Martin M. Andreasen

Aarhus University; CREATES, Aarhus University

Multiple version iconThere are 2 versions of this paper

Date Written: September 22, 9

Abstract

It is well-established that the presence of deterministic and/or stochastic trends in DSGE models may imply that the agents' objective functions attain infinite values. This is the case even if the subjective discount factor is strictly less than one. Currently, sufficient conditions ensuring finiteness of the objective functions when deterministic and/or stochastic trends are included have not been derived. This paper derives such conditions.

Keywords: Deterministic trends, DSGE models, Error distributions, Moment generating functions, Stochastic trends, Unit-roots

JEL Classification: E10, E30

Suggested Citation

Andreasen, Martin M., Sufficient Conditions for Finite Objective Functions in DSGE Models with Deterministic and Stochastic Trends (September 22, 9). Available at SSRN: https://ssrn.com/abstract=1098796 or http://dx.doi.org/10.2139/ssrn.1098796

Martin M. Andreasen (Contact Author)

Aarhus University ( email )

Aarhus
Denmark

CREATES, Aarhus University ( email )

School of Economics and Management
Building 1322, Bartholins Alle 10
DK-8000 Aarhus C
Denmark

HOME PAGE: http://econ.au.dk/research/research-centres/creates/people/junior-fellows/martin-andreasen/

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