TY  - UNPD
A1  - Böhl, Gregor
T1  - Efficient solution and computation of models with occasionally binding constraints
T2  - Working paper series / Institute for Monetary and Financial Stability ; 148
N2  - Occasionally binding constraints have become an important part of economic modelling, especially since western central banks see themselves (again) constraint by the so-called zero lower bound (ZLB) of the nominal interest rate. A binding ZLB constraint  poses a major problem for a quantitative-structural analysis: Linear solution methods do no work in the presence of a non-linearity such as the ZLB and existing alternatives tend to be computationally demanding. The urge to study macroeconomic questions related to the Great Recession and the  Covid-19 crisis in a quantitative-structural framework requires algorithms that are not only accurate, but that are also robust, fast, and computationally efficient.
A particularly important application where efficient and fast methods for occasionally binding constraints (OBCs) are needed is the Bayesian estimation of macroeconomic models. This paper shows that a linear dynamic rational expectations system with OBCs, depending on the expected duration of the constraint, can be represented in closed form. Combined with a set of simple equilibrium conditions, this can be exploited to avoid matrix inversions and simulations at runtime for signifcant gains in computational speed.
T3  - Working paper series / Institute for Monetary and Financial Stability - 148 
KW  - Occasionally Binding Constraints
KW  - Effective Lower Bound
KW  - Computational Methods
Y1  - 2021
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/56445
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-564457
UR  - https://www.imfs-frankfurt.de/fileadmin/user_upload/IMFS_WP/IMFS_WP_148.pdf
IS  - January 11, 2021
PB  - Johann Wolfgang Goethe-Univ., Inst. for Monetary and Financial Stability
CY  - Frankfurt am Main
ER  -