Three Essays on Regime-Switching DSGE Models

In recent years the unstable Macroeconomic and Geopolitical environment has shown the need for different modelling strategies, capable of handling the required flexibility. In this sense the embedding of Regime Switching parameters in standard DSGE models proves to be an attractive avenue for research. The large body of literature produced both for the solution and the estimation of this type of model and the birth of user-friendly instruments to handle them all goes to show the renewed interest in them. This thesis aims to support the transition towards the Regime Switching approach with three main contributions. The first chapter proposes a survey of the main contributions in the applications of Perturbation Methods for solving this type of models. The survey is built around the ordinary methods used for Constant Parameter Models in order to ease the comparison and the adoption for newcomers. The second chapter tries to exploit the foundations built with the first one by employing the RISE Toolbox (Junior Maih 2015) to perform the replication of two existing contributions in Karadi and Nakov 2021 and Foerster 2015. This replication works are done, not only to further develop and strengthen the existing literature of replication exercises, but they also serve as a laboratory to break down the way Markov-Switching models inner working. Moreover, in this chapter we aim at showing the potential of the RISE Toolbox. This software shares many similarities with Dynare, an established benchmark in Macroeconomic modelling, and can be a valid way for many economist to safely approach the RS-DSGE modelling avenue. Finally, in the third chapter we employ the RISE Toolbox and Markov-Switching parameters to change the way occasionally binding constraints are handled in models like the Karadi and Nakov (2021). This contribution aims at showing how the switching parameters can be used, not only, as new way model to model the economy but also as an instrument to re-think already existing models and modelling strategies.