Tutorials on Linearization methods

Posted: October 24, 2015 in Educational Material, Grad Macro I Fall 2015-2016
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How

Two good tutorials:

The first is on the Taylor-series expansion of a function which is used for linearizing a non-linear function (1st-order Taylor expansion), and also, usually in a stochastic context, for “mean-variance” analysis (2nd-order, Taylor expansion). Among other things we use it to linearize non-linear differential and difference equations in order to study their stability properties.

Taylor Series tutorial

 

The second is about log-linearization, which is another linearizing technique often used in Economics, and especially in macroeconomic models.

Log-linearizing Guide

 

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