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SOLVING THE UNIT ROOT PROBLEM IN MODELS WITH AN EXOGENOUS WORLD MARKET INTEREST RATE

Published online by Cambridge University Press:  25 August 2009

Manoj Atolia  and
Edward F. Buffie
Manoj Atolia*
Affiliation:
Florida State University
Edward F. Buffie
Affiliation:
Indiana University
*
Address correspondence to: Manoj Atolia, Department of Economics, Florida State University, Room 278 BEL, 113 Collegiate Loop, PO Box 3062180, Tallahassee, FL 32306-2180, USA; e-mail: [email protected].
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Abstract

The standard model of the small open economy is burdened with a unit root that greatly complicates numerical computation of the global saddle path. In this paper we solve the unit root problem by developing a set of innovative forward-shooting algorithms. Exploiting the fact that the algorithms are mechanical and model-free, we have placed canned, fully automated programs in the public domain. The programs do not require any substantive human input. The user's only responsibility is to type in the equations of the model correctly.

Keywords

Unit RootGlobal Saddle Path
Type
Articles
Information
Macroeconomic Dynamics , Volume 15 , Issue 5 , November 2011 , pp. 681 - 712
Copyright
Copyright © Cambridge University Press 2009

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References

REFERENCES

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