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A General and Efficient Method for Solving Regime-Switching DSGE Models

Abstract : This paper provides a general representation of endogenous and threshold-based regime switching models and develops an efficient numerical solution method. The regime-switching is triggered endogenously when some variables cross threshold conditions that can themselves be regime-dependent. We illustrate our approach using a RBC model with state-dependent government spending policies. It is shown that regime-switching models involve strong non linearities and discontinuities in the dynamics of the model. However, our numerical solution based on simulation and projection methods with regime-dependent policy rules is accurate, and fast enough, to efficiently take into all these challenging aspects. Several alternative specifications to the model and the method are studied.
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https://halshs.archives-ouvertes.fr/halshs-03067554
Contributor : Nelly Wirth <>
Submitted on : Tuesday, December 15, 2020 - 3:12:43 PM
Last modification on : Wednesday, January 27, 2021 - 4:15:00 PM

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  • HAL Id : halshs-03067554, version 1

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Julien Albertini, Stéphane Moyen. A General and Efficient Method for Solving Regime-Switching DSGE Models. 2020. ⟨halshs-03067554⟩

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