Some linear-Quadratic Solution Methods to Stochastic Nonlinear Rational Expectations Models.

Commonly used linear-quadratic solution methods to nonlinear models are described in detail using a closed economy real business cycle model as an illustration. We find that all method yield identical coefficients on optimal decision rules. Some methods are easier to use in economies where distortions do not allow a planners solution to solve for the competitive equilibrium. Finally, we find that for some methods only a few modifications to existing computer programs are needed when solving different models.