Analytic policy function iteration

• 成果类型: Article
• 署名作者: Han, Zhao; Tan, Fei; Wu, Jieran
• 署名单位: Saint Louis University; Zhejiang University of Finance & Economics; Zhejiang University; Zhejiang University
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2021.105395
• 发表日期: 2022
• 关键词: Endogenous information; Policy function iteration; Frequency-domain methods; Higher-order expectations

摘要

We propose an approach to solving and analyzing linear rational expectations models with general information frictions. Our approach is built upon policy function iterations in the frequency domain. We develop the theoretical framework of this approach using rational approximation, analytic continuation, and discrete Fourier transform. Conditional expectations, which are difficult to evaluate in the time domain, can be calculated efficiently in the frequency domain. We provide the numerical implementation accompanied by a flexible object-oriented toolbox. We demonstrate the efficiency and accuracy of our method by studying four models in macroeconomics and finance that feature asymmetric information sets, endogenous signals, and higher-order expectations. (c) 2021 Elsevier Inc. All rights reserved.