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Accuracy of Simulations for Stochastic Dynamic Models

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  • Manuel S. Santos
  • Adrian Peralta-Alva

Abstract

This paper is concerned with accuracy properties of simulations of approximate solutions for stochastic dynamic models. Our analysis rests upon a continuity property of invariant distributions and a generalized law of large numbers. We then show that the statistics generated by any sufficiently good numerical approximation are arbitrarily close to the set of expected values of the model's invariant distributions. Also, under a contractivity condition on the dynamics, we establish error bounds. These results are of further interest for the comparative study of stationary solutions and the estimation of structural dynamic models. Copyright The Econometric Society 2005.

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File URL: http://hdl.handle.net/10.1111/j.1468-0262.2005.00642.x
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Bibliographic Info

Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 73 (2005)
Issue (Month): 6 (November)
Pages: 1939-1976

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Handle: RePEc:ecm:emetrp:v:73:y:2005:i:6:p:1939-1976

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  1. Lawrence J. Christiano & Jonas D. M. Fisher, 1994. "Algorithms for solving dynamic models with occasionally binding constraints," Staff Report 171, Federal Reserve Bank of Minneapolis.
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