On Linear-Quadratic Approximations

6 Pages Posted: 3 Aug 2006

See all articles by Davide Debortoli

Davide Debortoli

Universitat Pompeu Fabra - Department of Economics and Business; Barcelona Graduate School of Economics (Barcelona GSE)

Ricardo Cavaco Nunes

Federal Reserve Banks - Federal Reserve Bank of Boston

Date Written: July 2006

Abstract

We prove the generality of the methodology proposed in Benigno and Woodford (2006). We show that, even in the presence of a distorted steady state, it is always possible and relatively simple to obtain a purely quadratic approximation to the welfare measure. We also show that, in order to do so, the timeless perspective assumption is crucial.

Keywords: Linear-Quadratic Approximation, Distorted Steady State, Timeless Perspective

JEL Classification: C61, C63

Suggested Citation

Debortoli, Davide and Nunes, Ricardo Cavaco, On Linear-Quadratic Approximations (July 2006). Available at SSRN: https://ssrn.com/abstract=920802 or http://dx.doi.org/10.2139/ssrn.920802

Davide Debortoli

Universitat Pompeu Fabra - Department of Economics and Business ( email )

Barcelona
Spain

Barcelona Graduate School of Economics (Barcelona GSE) ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

Ricardo Cavaco Nunes (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Boston ( email )

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