This paper studies how rare disasters and uncertainty shocks affect risk premia in DSGE models approximated to second and third order. Based on an extension of the results in Schmitt-Grohé & Uribe (2004) to third order, we derive propositions for how rare disasters, stochastic volatility, and...

This paper introduces a quasi maximum likelihood (QML) approach based on the central difference Kalman filter to estimate non-linear DSGE models with potentially non-Gaussian shocks. We argue that this estimator can be expected to be consistent and asymptotically normal for DSGE models solved up...

This paper develops a DSGE model in which banks use short term deposits to provide firms with long-term credit. The demand for long-term credit arises because firms must borrow in order to finance their capital stock which they only adjust at infrequent intervals. We show that the presence of...