Solving Non-Linear Models with Saddle-Path Instabilities

Stemp, Peter J.; Herbert, Ric D.

doi:10.1007/s10614-006-9042-6

Cited by 5 publications

(6 citation statements)

References 25 publications

(18 reference statements)

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“…We show that this gives unsatisfactory results for the non-linear model; and then, show how the default settings and choice of solver can be adjusted to give acceptable results. This paper builds on previous work by Stemp and Herbert [10] and Herbert and Stemp [4].…”

Section: Introductionmentioning

confidence: 71%

“…Two standard computational approaches to dynamic models with "jump" variables, like that considered in this paper, are the forward-shooting and reverse-shooting algorithms. We have previously considered these approaches in conjunction with the model considered in this paper (see Herbert and Stemp [4] and Stemp and Herbert [10]). …”

Section: Previous Workmentioning

confidence: 99%

“…In Stemp and Herbert [10], we focused on the case of the linear model with two stable complex-valued eigenvalues and one unstable real-valued eigenvalue. We employed the closed-form solution of the linear model as a benchmark to compare the properties of model solutions derived using reverse-shooting and forward-shooting.…”

Section: Previous Workmentioning

confidence: 99%

“…In Stemp and Herbert [10] we focused on the computational solution of the linear model in the most oscillatory case, which is the outcome for wages when η = 100. Using the RK solver, the reverse-shooting algorithm had difficulty reproducing the correct solution.…”

Section: Current Approachmentioning

confidence: 99%

See 3 more Smart Citations

Solving macroeconomic models with “off-the-shelf” software: An example of potential pitfalls

Herbert

Stemp

2011

Mathematics and Computers in Simulation

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Section: Introductionmentioning

confidence: 71%

Section: Previous Workmentioning

confidence: 99%

Section: Previous Workmentioning

confidence: 99%

Section: Current Approachmentioning

confidence: 99%

See 2 more Smart Citations

Solving macroeconomic models with “off-the-shelf” software: An example of potential pitfalls

Herbert

Stemp

2011

Mathematics and Computers in Simulation

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“…We follow Stemp and Herbert (2006) to use an approximation for the stable manifold that we cannot solve explicitly.…”

Section: Transition Dynamicsmentioning

confidence: 99%

Unemployment cycles

Lindenlaub¹,

Eeckhout²

2015

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The labor market by itself can create cyclical outcomes, even in the absence of exogenous shocks.We propose a theory that shows that the search behavior of the employed has profound aggregate implications for the unemployed. There is a strategic complementarity between active on-the-job search and vacancy posting by firms: active search changes the number of searchers and the duration of a job, and in the presence of sorting, it improves the quality of the pool of searchers. More vacancy posting in turn makes costly on-the-job search more attractive, a self-fulfilling belief. The absence of on-the-job search discourages vacancy posting, rendering costly on-the-job search unattractive.This model of multiple equilibria can account for large fluctuations in vacancies, unemployment, and job-to-job transitions; it provides a rationale for the Jobless Recovery through a novel channel of the employed searchers crowding out the unemployed; and it gives rise to a shift in the Beveridge Curve (the unemployment-vacancy locus). Each of these phenomena is matched in the data.

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Wage and employment determination in a dynamic insider–outsider model

Guerrazzi

2020

Evolut Inst Econ Rev

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In this paper, I develop a dynamic insider-outsider model in which a union of incumbent workers is called in to choose the wage of its members by taking into account the optimal employment policy of firms that, in turn, are assumed to decide the firing rate of insiders and the number of outsiders to hire. Under the assumption that incumbents are able to observe their own productivity, the one of outsiders and the amount of labour turnover costs paid by firms, I analytically show that the initial stock of insiders may pin down an equilibrium in which the trajectories of incumbents, their own wage and the firing rate are jointly determined and the proposition according to which insiders have an incentive to keep their numbers small holds on a static and a dynamic perspective. Moreover, I numerically show that in this setting insiders adjust their wage in order to retain their positions and such a behaviour leads to asymmetric employment fluctuations and a certain degree of wage stickiness.

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Solving Non-Linear Models with Saddle-Path Instabilities

Abstract: complex-valued eigenvalues, computational techniques, cyclic convergence, macroeconomics, monotonic convergence, real-valued eigenvalues, saddle-path instability,

Cited by 5 publications

References 25 publications

Solving macroeconomic models with “off-the-shelf” software: An example of potential pitfalls

Solving macroeconomic models with “off-the-shelf” software: An example of potential pitfalls

Unemployment cycles

Wage and employment determination in a dynamic insider–outsider model

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