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Other literature type . 2024
License: CC BY
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Log-Linearization Technique in DSGE Modeling: A Quick Guide

Authors: EL BAOUCHARI, NABIL; EL BAROUDI, Youness;

Log-Linearization Technique in DSGE Modeling: A Quick Guide

Abstract

This paper presents a concise yet effective technique for simplifying complex nonlinear equations by converting them into a log-linear form, with particular application to Dynamic Stochastic General Equilibrium (DSGE) models. The method, known as log-linearization, leverages Taylor series approximation to express nonlinear functions as linear relationships in logarithmic deviations around a steady-state equilibrium. By doing so, the approach enhances analytical tractability and facilitates the interpretation and solution of DSGE models. The paper provides illustrative examples, including applications to Real Business Cycle (RBC) models, to demonstrate the practical implementation and benefits of the technique in macroeconomic modeling.

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Keywords

DGSE models, Taylor approximation, log-deviations, RBC models, Log-linearization, examples

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
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