Advances in the computational methods for models with occasionally binding constraints
This course will present the most recent methods to study models with occasionally binding constraints. The focus will be on models with financial constraints which bind in some state of nature (e.g. recessions) or when variables reach a threshold ( e.g. a capital ratio trigger).
The lectures will be divided in three parts. The first covers piecewise linear methods in the spirit of Kulish and Pagan (2014) and Guerrieri and Iacoviello (2015), the construction of the likelihood function and its use in Bayesian estimation.
The second will consider a regime switching approach where binding state of natures may be recurrent as described e.g. in Liu et ta (2011) or Boccola (2016). The solution and the estimation of the parameters of such models will be performed using the package RISE toolbox.
The last part deals with projection techniques and policy function iterations. Although these methods can be quite complicated, particularly when implemented with all the advanced bells and whistles, their key building blocks are very simple. They can easily deal with nonlinearities and occasionally binding constraints.
A discussion of numerical integration methods will also be provided.
- Piecewise linear solution methods. ML and Bayesian estimation
- Solution and simulation of regime-switching DSGE models.
- Exogenous and endogenous switching. Occasionally-binding constraints.
- Projection techniques for models with occasionally binding constraints.
- Numerical integration. Splines. Fixed point and time iteration (policy function iteration).
What you will learn
- You will learn how to specify a model with occasionally binding constraints
- You will understand what different tools can give you in terms solution and the economic implications of different solution assumptions.
- You will be able to estimate the parameters of models subject to occasionally binding constraints.
- You will be able to conduct meaningful policy analyses with such models, compute impulse responses and counterfactuals.
How the course will work
The course will be structured in 3 two-hour blocks (9-11, 11:30-13:30, 15-17) plus one hour (17-18) of direct Q&A between participants and instructors.
In each block, 70-80 minutes will be used to illustrate the rationale and the mechanics of each of the approaches. The rest will be devoted to examples and/or program illustrations.
A certificate of attendance will be provided to all participants after the course.
Meet the instructors
Fabio Canova is Professor of Macroeconomics at the Norwegian Business School, Director of Training of the Florence School of Banking and Finance, Research associate with the Centre for Applied Macroeconomics and Petroleum Studies and the CEPR. He is also program director of the Budapest School of Central Bank Studies, Director of the International Association of Applied Econometrics, member of the scientific committee of the Euro Area Business Cycle network, a research visitor at the Norges Bank, and editor of the Journal of Applied Econometrics.
In the past he has held the Pierre Werner chair in Monetary Union at the Robert Schumann Center for Advanced Studues (2012-2014), The ICREA Research Professorship at Universitat Pompeu Fabra (2006-2012) and he has been Professor of Econometrics at the European University Institute (2011-2014) and Chair in Monetary Economics and the University of Bern (2008). He has been program committee member of the meetings of the International Association of Applied Econometrics (2014-2017), and European Econometric Society (2008-2017), chair for the European Meetings of the Econometric Society 2014, a panelist of ANVUR in 2013, coeditor of the Journal of the European Economic Association from 2008 to 2013, and a referee for ERC, NSF, ESRC research proposals.
Has has taught classes in numerous universities and given professional courses at many central Banks and international istitutions. He has held consultancy positions with the Bank of England, the ECB, the Bank of Italy, the Bank of Spain, and the IMF.
He has published over 85 articles in international journals and his graduate textbook, Methods for Applied Macroeconomic Research, has been published in 2007 by Princeton University Press and translated in Chinese in 2010.
Wouter J. den Haan is a professor of economics at the London School of Economics, research fellow and programme director of the CEPR, and co-director of the Centre for Macroeconomics.
Currently, his main areas of interest are business cycles, frictions in financial and labor markets, and numerical methods to solve models with a large number of heterogeneous agents. e graduated cum laude from the MA program at Erasmus University, he received his PhD degree at Carnegie Mellon University in 1991. This dissertation won him the Alexander Henderson Award for excellence in economics, an award also won by Nobel Laureates Oliver Williamson, Dale Mortensen, Finn Kydland and Edward Prescott.
He has been an assistant and associate professor at the University of California at San Diego, and he was promoted professor from 2001 to 2004. At the beginning of 2003 he became a professor of economics at London Business School. In 2006 he received a VICI award and became a professor of economics at the University of Amsterdam. He has been a visiting professor at the University of Rochester and the Wharton School and also a visiting scholar at the European Central Bank, the Board of Governors of the Federal Reserve System in Washington DC, and several regional Federal Reserve Banks.
Junior Maih received his PhD in economics in 2005 from the University of Oslo, Norway. Currently, he is a senior economist and special adviser at Norges Bank (Central bank of Norway) and associate professor in the department of economics of the Norwegian Business School (BI).
Prior to these appointments, he also worked for the International Monetary Fund, in the modeling division of the research department. He has been to several universities (Stanford, Santa Cruz, California Riverside, among others) and central banks (including the bank of Belgium, Banque de France, the bank of Canada, the Atlanta Fed, the Federal Reserve Board, the Bank of Hungary, San Francisco Fed, BEAC) either for giving mini courses, as a visiting scholar or for giving technical assistance.
He participates in the development of different toolboxes for solving and estimating structural macroeconomic models in general and DSGE models in particular, for example DYNARE. Among others, he is the author of the RISE toolbox for solving, simulating and estimating regime-switching macroeconomic models.
The following are required to be able to follow the course:
- Knowledge of dynamics stochastic general equilibrium models;
- Basic knowledge of perturbation techniques;
- Some experience with Bayesian estimation;
- Willingness to be fully immersed into the topic.
Participants are required to bring their own laptops with the following software installed:
800 € – Public Authorities (e.g. National Competent Authorities, Central Banks) and European Institutions*
1000€ – Private Sector
500€ – Students (with certificate of studies)**
The course fee covers coffee and lunch breaks. Travel and hotel costs are not included.
* In case of registration of 3 participants from the same institution, a reduced fee is applied for each of them (600€ public sector and 700€ private sector), under the following conditions:
- the names of the 3 participants have to be communicated to email@example.com before registering
- the names of other registered people from the same institution cannot be communicated. It is upon your responsibility to get in touch with your HR division
- a single debit note will be issued for the 3 participants followed by one payment
** Special deals for groups of Ph.D. students coming from the same institution will be considered.
- In case a course is cancelled, registered participants will receive the full refund.
- In case a course is moved to another date, registered participants may request a voucher to attend another FBF course.
- Registered participants who cancel their participation will receive a voucher to attend another FBF course.
For more details, please contact firstname.lastname@example.org
On arrival, participants will be provided with temporary wi-fi access for the whole duration of the course.
Course materialRegistered participants can access the course materials using the password provided by the course secretariat.