I am trying to run a Zero Lower Bound constraint in a new keynesian model and I have found so many versions and algorithms that I do not know what ZLB code is more appropriate for a normal NK model in dynare.
Thank you very much for your help.
there are two different approaches to implement the ZLB in the literature.
- Some papers implement it as a perfect foresight simulation.
- Other papers implement it as an occasionally binding constraint (OccBin).
For the OccBin approach there are two algorithms which are more popular.
One is from Tom Holden and the other is from Guerrieri & Iacoviello (2015).
The latter is simpler and more useful for beginners, but less powerful.
Thank you Max1 for your reply. And could you provide any example of papers or codes that implement it as a perfect foresight simulation.
Thanks once more for you help!
You should have a look at Johannes homepage and GitHub page.
There you can find examples like this one: