Global DSGE Models
55 Pages Posted: 15 Apr 2020 Last revised: 11 May 2020
Date Written: April 1, 2020
In this paper, we introduce our GDSGE framework and MATLAB toolbox for solving dynamic stochastic general equilibrium models with a novel global solution method. The framework encompasses many well-known incomplete markets models with highly nonlinear dynamics such as models on financial crises, models with rare disasters (such as the current COVID-19 pandemic), with many financial assets and portfolio choices, and with occasionally binding constraints. The toolbox allows users to input a simple and intuitive model description script similar to Dynare, and returns a convenient MATLAB interface for accessing efficient computations implemented in C++. The toolbox is most effective in solving models featuring endogenous state variables with implicit law-of-motion such as wealth shares or consumption shares. It solves many recent important models more efficiently and accurately compared to their original solution algorithms.
Keywords: nonlinear DSGE models, incomplete markets, financial crises, rare disasters, global solution method, computation toolbox, implicit law-of-motions, consistency equations
JEL Classification: C62, C63, C68, D50, D90, E00, F30, F40, G01, G10
Suggested Citation: Suggested Citation