Macro-Finance Models with Nonlinear Dynamics

Author:

Dou Winston Wei12,Fang Xiang3,Lo Andrew W.24567,Uhlig Harald28

Affiliation:

1. Finance Department, The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania, USA

2. National Bureau of Economic Research, Cambridge, Massachusetts, USA

3. HKU Business School, The University of Hong Kong, Hong Kong SAR, China

4. Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts, USA;

5. Laboratory for Financial Engineering, Massachusetts Institute of Technology, Cambridge, Massachusetts, USA

6. Computer Science and Artificial Intelligence Laboratory, Massachusetts Institute of Technology, Cambridge, Massachusetts, USA

7. Santa Fe Institute, Santa Fe, New Mexico, USA

8. Kenneth C. Griffin Department of Economics, University of Chicago, Chicago, Illinois, USA

Abstract

We review macro-finance models featuring nonlinear dynamics that have recently been developed in the literature, including models with funding liquidity constraints, market liquidity frictions, and bank run frictions, and discuss the empirical evidence and challenges of this class of models. We also construct an illustrative model featuring financial frictions and nonlinear dynamics for readers who are unfamiliar with the literature. We solve the model using different solution techniques, including both global and perturbation solution methods, and comprehensively compare the accuracy of these solutions. Within this framework, we highlight that local linearization approximations omit important nonlinear dynamics and yield biased impulse responses.

Publisher

Annual Reviews

Subject

Economics and Econometrics,Finance

同舟云学术

1.学者识别学者识别

2.学术分析学术分析

3.人才评估人才评估

"同舟云学术"是以全球学者为主线,采集、加工和组织学术论文而形成的新型学术文献查询和分析系统,可以对全球学者进行文献检索和人才价值评估。用户可以通过关注某些学科领域的顶尖人物而持续追踪该领域的学科进展和研究前沿。经过近期的数据扩容,当前同舟云学术共收录了国内外主流学术期刊6万余种,收集的期刊论文及会议论文总量共计约1.5亿篇,并以每天添加12000余篇中外论文的速度递增。我们也可以为用户提供个性化、定制化的学者数据。欢迎来电咨询!咨询电话:010-8811{复制后删除}0370

www.globalauthorid.com

TOP

Copyright © 2019-2024 北京同舟云网络信息技术有限公司
京公网安备11010802033243号  京ICP备18003416号-3