Third order approximation at the ZLB

General DSGE Modeling
1

Hi
I just wanted to ask if Dynare 5.1 is able to solve occasionally binding or ZLB when a model considers uncertainty shocks with a third-order approximation ?

Many Thanks

2

AFAIK, Dynare handles occasionally binding constraints only in a piecewise-linear fashion, by combining the first order approx. of the different regimes of the underlying model, or fully non-linear in the context of a perfect foresight simulation. In both cases, there is certainty equivalence (hence no precautionary behavior).

3

Standard perturbation is incompatible with non-differentiabilities like occasionally binding constraints.

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