Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/118761 
Authors: 
Year of Publication: 
1998
Series/Report no.: 
Volkswirtschaftliche Diskussionsbeiträge No. 66-98
Publisher: 
Universität Siegen, Fakultät III, Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht, Siegen
Abstract: 
This paper discusses solution procedures for real business cycle (RBC) models. First, we show that the most often used solution methods, the linear-quadratic approximation, the Lagrange multiplier, and the Euler equation approach all lead to the same decision function. Second, we demonstrate that deterministic and stochastic detrending methods which are used to transform the growing model economy to a stationary one, lead to the same model solution, no matter if the technology process has a unit root or not. Third, we show that contrary to statements in the literature the numerical value of the growth rate of the model can have substantial effects on the model results.
Document Type: 
Working Paper

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