Exact solution to nonlinear euler equations with stochastic interest rates

Verschueren, Frédéric
(2002) Econometric Society European Meeting — Location: Venise

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  • Verschueren, FrédéricFUCaM
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Abstract
(en) This paper presents an exact solution of a standard non linear forward looking rational expectations (NLRE) model where gaussien shocks are affecting interest rates in a non linear way. The result is used to assess how interest rates dynamics affects business investment. For the U.S. economy (1965-2001), there are clear evidence that the exact solution performs better than the usual linear approximation.
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  • Louvain School of Management

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Verschueren, F. (2002). Exact solution to nonlinear euler equations with stochastic interest rates. Econometric Society European Meeting, Venise. https://hdl.handle.net/2078.5/129621