Solving the Unit Root Problem in Models With an Exogenous World Market Interest Rate

55 Pages Posted: 16 Oct 2008 Last revised: 24 Nov 2008

See all articles by Manoj Atolia

Manoj Atolia

Florida State University - Department of Economics

Edward F. Buffie

Indiana University Bloomington - Department of Economics

Date Written: November 1, 2008

Abstract

The standard model of the small open economy is saddled with a unit root that greatly complicates numerical computation of the global saddle path. In this paper we solve the unit root problem by developing a set of innovative forward-shooting algorithms. Exploiting the fact that the algorithms are mechanical and model-free, we have placed canned, fully automated programs in the public domain. The programs do not require any substantive human input. The user's only responsibility is to type in the equations of the model correctly.

Keywords: Unit root, global saddle path

JEL Classification: F41, C61, C63

Suggested Citation

Atolia, Manoj and Buffie, Edward F., Solving the Unit Root Problem in Models With an Exogenous World Market Interest Rate (November 1, 2008). Available at SSRN: https://ssrn.com/abstract=1285053 or http://dx.doi.org/10.2139/ssrn.1285053

Manoj Atolia (Contact Author)

Florida State University - Department of Economics ( email )

Tallahassee, FL 30306-2180
United States
+1.850.644.7088 (Phone)
+1.850.644.4535 (Fax)

HOME PAGE: http://mailer.fsu.edu/~matolia/

Edward F. Buffie

Indiana University Bloomington - Department of Economics ( email )

Wylie Hall 105
107 S. Indiana Avenue
Bloomington, IN 47405-7000
United States
812-855-4848 (Phone)

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