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JOINT VIENNA
MACROECONOMICS
SEMINAR |
INVITATION |
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The Joint Vienna Institute and the Institute for Advanced Studies cordially invite you to the following Joint Vienna Macroeconomics Seminar
Tuesday, May 29, 2018
Institute for Advanced Studies
Josefstädter Straße 39, 1080 Vienna
Salon, 1st floor
5:00 pm
Junior Maih
(Norges Bank)
Modelling Occasionally-Binding Constraints Using Regime Switching Abstract: Occasionally binding constraints are part of the economic landscape: for instance recent experience with the global financial crisis has highlighted the gravity of the lower bound constraint on interest rates; mortgagors are subject
to more stringent borrowing conditions when credit growth has been excessive or there is a downturn in the economy. In this paper we take four common examples of occasionally binding constraints in economics and demonstrate how to use regime-switching to incorporate
them into DSGE models. In particular we investigate the zero lower bound constraint on interest rates, occasionally binding collateral constraints, downward nominal wage rigidities and irreversible investment. We compare our approach against some well-known
methods for solving occasionally-binding constraints. We demonstrate the versatility of our regime-switching approach by combining multiple occasionally binding constraints to a model solved using higher-order perturbation methods, a feat that is difficult
to achieve using alternative methodologies. joint with Andrew Binning
IHS Institute for Advanced Studies
Josefstädter Straße 39, 1080 Vienna, Austria
Tel.: +43 1 599 91 - 250
e-Mail: hanl-lohn@ihs.ac.at
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