The National Bank of Georgia continues to further enhance analytical communication with the public and starts to publish the NBG Working Paper Series. The working papers aim to present research on topics relevant to central banks and economics profession. The papers are circulated to elicit comments and encourage debate on ongoing research. The Working Paper Series are coordinated by the Macroeconomic Research Division and will focus on topics relevant for central bank policy, including macroeconomic modeling, monetary and exchange rate policies, financial stability, etc.

The first working paper in the series titled "Solving non-linear dynamic models (more) efficiently:  application to a simple monetary policy model" was prepared by the staff of Macroeconomics Research Division at the NBG in collaboration with Douglas Laxton (Adjunct Professor of Economics at NOVA School of Business and Economics; Director of Saddle Point Research and the Better Policy Project). This paper proposes two new solution methods for solving non-linear dynamic models that seem to be more efficient and accurate. In addition, and more importantly, the paper shows how to do non-linear version of Kalman filtering that helps us use non-linear models to interpret non-linear episodes in the data. This seems to be a major contribution that can significantly increase the appeal of using non-linear models in everyday work of policy-making and research institutions.

The working papers can be accessed at the following page