Schmitt-Grohé, Stephanie; Uribe, Martín - C.E.P.R. Discussion Papers - 2001
Since the seminal papers of Kydland and Prescott (1982) and King, Plosser and Rebelo (1988), it has become commonplace in macroeconomics to approximate the solution to nonlinear, dynamic general equilibrium models using linear methods. Linear approximation methods are useful to characterize...