Production Technologies in Stochastic Continuous Time Models

Abstract

Properties of dynamic stochastic general equilibrium models can be revealed by either using numerical solutions or qualitative analysis. Very precise and intuition-building results are obtained by working with models which provide closed-form solutions. Closed-form solutions are known for a large class of models some of which, however, have some undesirable features. This paper offers closed-form solutions for models which are just as tractable but do not suffer from these shortcomings.

Keywords: dynamic stochastic general equilibrium models, closed-form solution, continuous time, jump diffusion

JEL Classification: E20, O40