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Accuracy in Simulations

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  • Wouter J. Den Haan
  • Albert Marcet

Abstract

Since the actual solution to intertemporal rational expectations models is usually not known, it is useful to have criteria for judging the accuracy of a given numerical solution. In this paper we propose a test for accuracy that is easy to implement and can be applied to a wide class of models without knowledge of the exact solution. We discuss the power of the test by simulating several models with the linear-quadratic approximation and with the method of parameterized expectations. We conclude that the test is powerful.

Suggested Citation

  • Wouter J. Den Haan & Albert Marcet, 1994. "Accuracy in Simulations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 61(1), pages 3-17.
    • Handle: RePEc:oup:restud:v:61:y:1994:i:1:p:3-17.
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    File URL: http://hdl.handle.net/10.2307/2297873
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