diff --git a/doc/dynare.texi b/doc/dynare.texi
index bea99bac5..3010eb738 100644
--- a/doc/dynare.texi
+++ b/doc/dynare.texi
@@ -3172,13 +3172,17 @@ Determines the method used to compute the decision rule. Possible values for @co
@table @code
@item default
-Uses the default method to compute the decision rule based on the generalized Schur decomposition
+Uses the default method to compute the decision rule based on the generalized Schur decomposition
(see @cite{Villemot (2011)} for more information).
@item cycle_reduction
-Uses the cycle reduction algorithm to solve the polynomial equation for retrieving the coefficients
+Uses the cycle reduction algorithm to solve the polynomial equation for retrieving the coefficients
associated to the endogenous variables in the decision rule. This method is faster than the @code{default} one for large scale models.
+@item logarithmic_reduction
+Uses the logarithmic reduction algorithm to solve the polynomial equation for retrieving the coefficients
+associated to the endogenous variables in the decision rule. This method is in general slower than the @code{cycle_reduction}.
+
@end table
@noindent
@@ -3186,7 +3190,16 @@ Default value is @code{default}
@item dr_cycle_reduction_tol = @var{DOUBLE}
@anchor{dr_cycle_reduction_tol}
-It is the convergence criterion used in the cycle reduction algorithm. Its default value is 1e-7.
+The convergence criterion used in the cycle reduction algorithm. Its default value is 1e-7.
+
+@item dr_logarithmic_reduction_tol = @var{DOUBLE}
+@anchor{dr_logarithmic_reduction_tol}
+The convergence criterion used in the logarithmic reduction algorithm. Its default value is 1e-12.
+
+@item dr_logarithmic_reduction_maxiter = @var{INTEGER}
+@anchor{dr_logarithmic_reduction_maxiter}
+The maximum number of iterations used in the logarithmic reduction algorithm. Its default value is 100.
+
@end table
diff --git a/matlab/dyn_first_order_solver.m b/matlab/dyn_first_order_solver.m
index 988be3ffc..74fbe6213 100644
--- a/matlab/dyn_first_order_solver.m
+++ b/matlab/dyn_first_order_solver.m
@@ -149,11 +149,15 @@ A = aa(:,index_m); % Jacobain matrix for lagged endogeneous variables
B = aa(:,index_c); % Jacobian matrix for contemporaneous endogeneous variables
C = aa(:,index_p); % Jacobain matrix for led endogeneous variables
-if task ~= 1 && DynareOptions.dr_cycle_reduction == 1
+if task ~= 1 && (DynareOptions.dr_cycle_reduction || DynareOptions.dr_logarithmic_reduction)
A1 = [aa(row_indx,index_m ) zeros(ndynamic,nfwrd)];
B1 = [aa(row_indx,index_0m) aa(row_indx,index_0p) ];
C1 = [zeros(ndynamic,npred) aa(row_indx,index_p)];
- [ghx, info] = cycle_reduction(A1, B1, C1, DynareOptions.dr_cycle_reduction_tol);
+ if DynareOptions.dr_cycle_reduction == 1
+ [ghx, info] = cycle_reduction(A1, B1, C1, DynareOptions.dr_cycle_reduction_tol);
+ else
+ [ghx, info] = logarithmic_reduction(C1, B1, A1, DynareOptions.dr_logarithmic_reduction_tol, DynareOptions.dr_logarithmic_reduction_maxiter);
+ end
ghx = ghx(:,index_m);
hx = ghx(1:npred+nboth,:);
gx = ghx(1+npred:end,:);
diff --git a/matlab/global_initialization.m b/matlab/global_initialization.m
index 77be2a119..ce0a43109 100644
--- a/matlab/global_initialization.m
+++ b/matlab/global_initialization.m
@@ -28,8 +28,7 @@ function global_initialization()
% You should have received a copy of the GNU General Public License
% along with Dynare. If not, see .
-global oo_ M_ options_ estim_params_ bayestopt_ estimation_info ex0_ ys0_ ...
- ex_det0_
+global oo_ M_ options_ estim_params_ bayestopt_ estimation_info ex0_ ys0_ ex_det0_
estim_params_ = [];
bayestopt_ = [];
@@ -450,6 +449,14 @@ options_.dr_cycle_reduction = 0;
% convergence criterion for iteratives methods to solve the decision rule
options_.dr_cycle_reduction_tol = 1e-7;
+% if equal to 1 use a logarithmic reduction method to compute the decision rule (for large scale models)
+options_.dr_logarithmic_reduction = 0;
+
+% convergence criterion for iteratives methods to solve the decision rule
+options_.dr_logarithmic_reduction_tol = 1e-12;
+
+% convergence criterion for iteratives methods to solve the decision rule
+options_.dr_logarithmic_reduction_maxiter = 100;
% dates for historical time series
options_.initial_date.freq = 1;
diff --git a/preprocessor/DynareBison.yy b/preprocessor/DynareBison.yy
index 5c0e5e8f5..2ee59d062 100644
--- a/preprocessor/DynareBison.yy
+++ b/preprocessor/DynareBison.yy
@@ -95,8 +95,8 @@ class ParsingDriver;
%token BVAR_PRIOR_DECAY BVAR_PRIOR_FLAT BVAR_PRIOR_LAMBDA
%token BVAR_PRIOR_MU BVAR_PRIOR_OMEGA BVAR_PRIOR_TAU BVAR_PRIOR_TRAIN
%token BVAR_REPLIC BYTECODE
-%token CALIB_SMOOTHER CHANGE_TYPE CHECK CONDITIONAL_FORECAST CONDITIONAL_FORECAST_PATHS CONF_SIG CONSTANT CONTROLLED_VAREXO CORR COVAR CUTOFF CYCLE_REDUCTION
-%token DATAFILE FILE DOUBLING DR_CYCLE_REDUCTION_TOL DR_ALGO DROP DSAMPLE DYNASAVE DYNATYPE CALIBRATION
+%token CALIB_SMOOTHER CHANGE_TYPE CHECK CONDITIONAL_FORECAST CONDITIONAL_FORECAST_PATHS CONF_SIG CONSTANT CONTROLLED_VAREXO CORR COVAR CUTOFF CYCLE_REDUCTION LOGARITHMIC_REDUCTION
+%token DATAFILE FILE DOUBLING DR_CYCLE_REDUCTION_TOL DR_LOGARITHMIC_REDUCTION_TOL DR_LOGARITHMIC_REDUCTION_MAXITER DR_ALGO DROP DSAMPLE DYNASAVE DYNATYPE CALIBRATION
%token END ENDVAL EQUAL ESTIMATION ESTIMATED_PARAMS ESTIMATED_PARAMS_BOUNDS ESTIMATED_PARAMS_INIT EXTENDED_PATH
%token FILENAME FILTER_STEP_AHEAD FILTERED_VARS FIRST_OBS LAST_OBS SET_TIME
%token FLOAT_NUMBER
@@ -939,6 +939,8 @@ stoch_simul_options : o_dr_algo
| o_sylvester_fixed_point_tol
| o_dr
| o_dr_cycle_reduction_tol
+ | o_dr_logarithmic_reduction_tol
+ | o_dr_logarithmic_reduction_maxiter
;
symbol_list : symbol_list symbol
@@ -1508,6 +1510,8 @@ estimation_options : o_datafile
| o_lyapunov_doubling_tol
| o_dr
| o_dr_cycle_reduction_tol
+ | o_dr_logarithmic_reduction_tol
+ | o_dr_logarithmic_reduction_maxiter
| o_analytic_derivation
;
@@ -2318,8 +2322,11 @@ o_lyapunov : LYAPUNOV EQUAL FIXED_POINT {driver.option_num("lyapunov_fp", "1");
o_lyapunov_fixed_point_tol : LYAPUNOV_FIXED_POINT_TOL EQUAL non_negative_number {driver.option_num("lyapunov_fixed_point_tol",$3);};
o_lyapunov_doubling_tol : LYAPUNOV_DOUBLING_TOL EQUAL non_negative_number {driver.option_num("lyapunov_doubling_tol",$3);};
o_dr : DR EQUAL CYCLE_REDUCTION {driver.option_num("dr_cycle_reduction", "1"); }
- | DR EQUAL DEFAULT {driver.option_num("dr_cycle_reduction", "0"); };
+ | DR EQUAL LOGARITHMIC_REDUCTION {driver.option_num("dr_logarithmic_reduction", "1"); }
+ | DR EQUAL DEFAULT {driver.option_num("dr_cycle_reduction", "0"); driver.option_num("dr_logarithmic_reduction", "0");};
o_dr_cycle_reduction_tol : DR_CYCLE_REDUCTION_TOL EQUAL non_negative_number {driver.option_num("dr_cycle_reduction_tol",$3);};
+o_dr_logarithmic_reduction_tol : DR_LOGARITHMIC_REDUCTION_TOL EQUAL non_negative_number {driver.option_num("dr_logarithmic_reduction_tol",$3);};
+o_dr_logarithmic_reduction_maxiter : DR_LOGARITHMIC_REDUCTION_MAXITER EQUAL INT_NUMBER {driver.option_num("dr_logarithmic_reduction_maxiter",$3);};
o_bvar_prior_tau : BVAR_PRIOR_TAU EQUAL signed_number { driver.option_num("bvar_prior_tau", $3); };
o_bvar_prior_decay : BVAR_PRIOR_DECAY EQUAL non_negative_number { driver.option_num("bvar_prior_decay", $3); };
diff --git a/preprocessor/DynareFlex.ll b/preprocessor/DynareFlex.ll
index f77adc845..28d72ad0a 100644
--- a/preprocessor/DynareFlex.ll
+++ b/preprocessor/DynareFlex.ll
@@ -303,6 +303,7 @@ string eofbuff;
doubling {return token::DOUBLING;}
square_root_solver {return token::SQUARE_ROOT_SOLVER;}
cycle_reduction {return token::CYCLE_REDUCTION;}
+logarithmic_reduction {return token::LOGARITHMIC_REDUCTION;}
default {return token::DEFAULT;}
alpha {
yylval->string_val = new string(yytext);
@@ -514,6 +515,8 @@ string eofbuff;
lyapunov_fixed_point_tol {return token::LYAPUNOV_FIXED_POINT_TOL;}
lyapunov_doubling_tol {return token::LYAPUNOV_DOUBLING_TOL;}
dr_cycle_reduction_tol {return token::DR_CYCLE_REDUCTION_TOL;}
+dr_logarithmic_reduction_tol {return token::DR_LOGARITHMIC_REDUCTION_TOL;}
+dr_logarithmic_reduction_maxiter {return token::DR_LOGARITHMIC_REDUCTION_MAXITER;}
replic {return token::REPLIC;}
ar {return token::AR;}
nofunctions {return token::NOFUNCTIONS;}