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Sticky Information Models in Dynare

20 Pages Posted: 2 Jul 2013  

Fabio Verona

Bank of Finland - Research

Maik H. Wolters

Kiel Institute for the World Economy - IFW

Date Written: March 26, 2013

Abstract

Macroeconomic models with sticky information include an infinite number of lagged expectations. Several authors have developed specialized solutions algorithms to solve these models under rational expectations. We demonstrate that it is also possible to implement this class of models in Dynare – a widely used software package for solving dynamic stochastic general equilibrium (DSGE) models. Using the Dynare macro language one can easily construct and change the required large number of lagged expectation terms. We assess the accuracy of simulations run with different truncation points for the lagged expectations terms and find that the solution is reasonably precise even for moderate truncation points.

Keywords: sticky information, Dynare, macro-processor, lagged expectations

JEL Classification: C54, C63

Suggested Citation

Verona, Fabio and Wolters, Maik H., Sticky Information Models in Dynare (March 26, 2013). Bank of Finland Research Discussion Paper No. 5/2013. Available at SSRN: https://ssrn.com/abstract=2263145 or http://dx.doi.org/10.2139/ssrn.2263145

Fabio Verona (Contact Author)

Bank of Finland - Research ( email )

P.O. Box 160
FIN-00101 Helsinki
Finland

HOME PAGE: http://bofcris.solenovo.fi/crisyp/disp/_/en/cr_redir_all/fet/fet/sea?direction=3&id=3827426

Maik Wolters

Kiel Institute for the World Economy - IFW ( email )

United States

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