README.md

In nuritovbek/lrem: Solving and simulating a class of LRE models

Solving and simulating a class of LRE models

This package solves for the recursive representation of the stable solution to a system of linear difference equations. The package contains formulas for dealing with both the autonomous LRE and LRE with an AR element and the associated exogenous shocks.

Specifically, included are: 1) The formulas that give the decision and motion rules for a dynamic system as per Blanchard and Kahn, Klein. With formulas lre_auto for the autonomous case and lre_ar for the AR case.

For the autonomous LRE, Inputs are two square matrices E and A and a natural number n where E and A are the coefficient matrices of the difference equation Ext + 1 = Axt

For the AR LRE, inputs are the previously defined matrices E and A in addition to a matrix B and Φ that satisfy the following system

$Ex_{t+1} = Ax_t + Bu_t \\ u_{t+1} = \Phi u_t + e_t$

1. Simulation formulas that should also provide the impulse response of the system to an exogenous shock to examine the evolution of the dynamic system.

To install run:

devtools::install_github("nuritovbek/lrem")

To use the package, call the required lre function with the coefficient matrices of your model and a number of predetermined variables in n: e.g.

library(lrem)
sim <- lre_auto(A, E, n)

And then iterate the decision and motion rules by running

out <- simulate_no_shock(sim[[1]], sim[[2]], x0, t)

nuritovbek/lrem documentation built on May 4, 2019, 4:24 p.m.