Macro-Finance Models with Nonlinear Dynamics

作者：Winston Wei Dou, Xiang Fang, Andrew W. Lo, Harald Uhlig · 发表于：Annual Review of Financial Economics · 年份：2023 · DOI：10.1146/annurev-financial-110921-112053 · 被引用次数：25 · 研究领域：Economic theories and models、Banking stability, regulation, efficiency、Financial Markets and Investment Strategies

We review macro-finance models featuring nonlinear dynamics that have recently been developed in the literature, including models with funding liquidity constraints, market liquidity frictions, and bank run frictions, and discuss the empirical evidence and challenges of this class of models. We also construct an illustrative model featuring financial frictions and nonlinear dynamics for readers who are unfamiliar with the literature. We solve the model using different solution techniques, including both global and perturbation solution methods, and comprehensively compare the accuracy of these solutions. Within this framework, we highlight that local linearization approximations omit important nonlinear dynamics and yield biased impulse responses.