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Which DSGE model solver should I use?

 

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YADA supports three algorithms for solving a DSGE model. The default is AiM, due to Anderson and Moore (1985), while the alternatives are Paul Klein's solab and Christopher Sims' gensys. The AiM algorithm is generally considerably faster than solab and gensys, but also appears to be more prone to have numerical issues during posterior mode optimization. In particular, optimization with AiM as model solver may be troublesome when AiM needs to use at least one numerical shiftright during its calculation.

Recommendation: Use AiM unless you run into problems during, e.g., posterior mode estimation. These problems may concern convergence with csminwel. Changing the model solver to solab or gensys may solve this issue since the QZ decomposition that they both rely on is numerically stable. In terms of speed, the solab algorithm tends to be faster than gensys.

NOTE: The article by Anderson (2008) compares a number of different model solvers, including those supported by YADA. The variant of AiM used for that study, however, differs from the one supplied with YADA and may therefore have better numerical properties.

 

 


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