Macroeconomics Seminar Series. Beyond Certainty Equivalence: Second-order Dynamics in the Sequence Space (joint with Adrien Auclert, Matthew Rognlie, and Ludwig Straub)
Published: 13 October 2025
6 November 2025. Dr Rodolfo Rigato, European Central Bank
Dr Rodolfo Dinis Rigato (European Central Bank)
Beyond Certainty Equivalence: Second-order Dynamics in the Sequence Space (joint with Adrien Auclert, Matthew Rognlie, and Ludwig Straub)
Thursday, 6 November 2025, 15:00–16:30
Room G56 (Seminar Room 1), Kelvin Hall
Abstract
We show how to extend the certainty equivalence argument to solve for second-order dynamics of general equilibrium macroeconomic models in the sequence space. In addition to the first-order impulse response, these dynamics are characterized by a size-dependence impulse response capturing the eƯect of large shocks, impulse responses for history dependence capturing the eƯect of past shocks at diƯerent lags, and a constant term reflecting anticipation of future aggregate risk. We propose a fast algorithm to solve for all these terms using the nonlinear solution of the model under perfect foresight. We apply our method to quantify the time variation in the fiscal multiplier in a HANK model, and the time variation in the slope of the Phillips curve in a menu cost model.
Biography
Rodolfo Rigato is a senior economist at the European Central Bank. He earned his Ph.D. from Harvard University and specializes in heterogeneous-agent macroeconomics and firms’ pricing behavior.
For further information, please contact business-seminar-series@glasgow.ac.uk.
We are committed to providing a collegial, inclusive, and intellectually stimulating environment for all our seminars, in accordance with our established Code of Conduct.
First published: 13 October 2025