challenging to solve. One approach to tackle this difficulty is to use bivariate piecewise linear approximations for each variable …

when using log-linear approximations can be economically significant when the shocks are nonnormal. Assuming growth rates … article. We also consider a standard long-run risk model and, by comparing our exact solutions to the log-linear … approximations, we show that the approximation errors are substantial, especially for high levels of risk aversion. …