Solving the real business cycles model of small-open economies by a sample-independent approach
✍ Scribed by Wen-Ya Chang; Hsiu-Yun Lee; Yu-Lin Wang
- Publisher
- Elsevier Science
- Year
- 2003
- Tongue
- English
- Weight
- 266 KB
- Volume
- 27
- Category
- Article
- ISSN
- 0165-1889
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✦ Synopsis
One hallmark of small-open economy models with a time-separable preference assumption is the non-uniqueness of their steady states. Following King et al. (J. Monetary Econ. 21 (1988) 195-232), most studies compute a log-linear approximation solution to their small-open economies around the sample means of the corresponding variables. The resulting reliance of the outcome on a particular sample may lead to di erent implications about the business cycles properties of a small-open economy. This paper proposes a sample-independent approach to solving this kind of model and shows its superiority over a sample-dependent method through some simulation results.