What is Dynare ?

Dynare is a pre-processor and a collection of MATLAB® and GNU Octave routines which solve non-linear models with forward looking variables. It is the result of research carried at CEPREMAP by several people (see Laffargue, 1990, Boucekkine, 1995, and Juillard, 1996, Collard and Juillard 2001, 2001b).

When the framework is deterministic, Dynare can be used for models with the assumption of perfect foresight. Typically, the system is supposed to be in a state of equilibrium before a period 1 when the news of a contemporaneous or of a future shock is learned by the agents in the model. The purpose of the simulation is to describe the reaction in anticipation of, then in reaction to the shock, until the system returns to the old or to a new state of equilibrium. In most models, this return to equilibrium is only an asymptotic phenomenon, which one must approximate by an horizon of simulation far enough in the future. Another exercise for which Dynare is well suited is to study the transition path to a new equilibrium following a permanent shock. For deterministic simulations, Dynare uses a Newton-type algorithm, first proposed by Laffargue (1990), instead of a first order technique like the one proposed by Fair and Taylor (1983), and used in earlier generation simulation programs. We believe this approach to be in general both faster and more robust. The details of the algorithm can be found in Juillard (1996).

In a stochastic context, Dynare computes one or several simulations corresponding to a random draw of the shocks. Dynare uses a Taylor approximation, up to third order, of the expectation functions (see Judd (1996), Collard and Juillard (2001a), Collard and Juillard (2001b), and Schmitt-Grohe and Uribe (2002)).

It is also possible to use Dynare to estimate model parameters either by maximum likelihood as in Ireland (2004) or using a Bayesian approach as in Rabanal and Rubio-Ramirez (2003), Schorfheide (2000) or Smets and Wouters (2003).

Dynare also comes with Dynare++, which is a standalone C++ version of Dynare specialized in computing k-order approximations of dynamic stochastic general equilibrium models. The current version calculates the approximation of decision rules around the deterministic or stochastic steady state, runs a number of simulations and dumps all the results to a MAT file.

Currently the development team of Dynare is composed of S. Adjemian, H. Bastani, M. Juillard, F. Mihoubi, G. Perendia, M. Ratto and S. Villemot. Several parts of Dynare use or have strongly benefited from publicly available programs by G. Anderson, F. Collard, L. Ingber, O. Kamenik, P. Klein, S. Sakata, F. Schorfheide, C. Sims, P. Soederlind and R. Wouters.

Dynare and Dynare++ run on Microsoft Windows® platforms, on Mac OS X and on various flavours of Linux.

Dynare and Dynare++ are free software, and most of their source files are covered by the General Public License version 3 or later (there are some exceptions to this, see the file license.txt in Dynare distribution).