solve_2nd_order: Solve Second-Order Perturbation

In dsge: Dynamic Stochastic General Equilibrium Models

Solve Second-Order Perturbation

Description

Computes the second-order approximation of a nonlinear DSGE model around its deterministic steady state.

Usage

solve_2nd_order(model, params, shock_sd, tol = 1e-06)

Arguments

model	A dsgenl_model object.
params	Named numeric vector of parameters.
shock_sd	Named numeric vector of shock standard deviations.
tol	Eigenvalue tolerance for first-order solution.

Details

The second-order terms capture nonlinear effects including:

• Asymmetric responses to positive vs negative shocks

• Risk/precautionary effects (g_ss, h_ss corrections)

• State-dependent dynamics (quadratic policy terms)

Uses the method of Schmitt-Grohe and Uribe (2004).

Value

A dsge_solution object with additional second-order fields: order, g_xx, h_xx, g_ss, h_ss.

dsge documentation built on Sept. 25, 2026, 5:08 p.m.