Weighted Residuals Methods

Abstract

This chapter introduces readers to global methods, which, unlike local perturbation methods, draw on information from various points in the state space of a dynamic stochastic general equilibrium (DSGE) model. The methods presented here are interchangeably referred to as weighted residuals methods and projection methods. Applications cover the deterministic growth model, the benchmark business cycle model, a model with labor market frictions, and a disaster risk model driven by shocks that trigger infrequent but severe recessions.