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Numerical Simulation Of Nonoptimal Dynamic Equilibrium Models

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  • ZHIGANG FENG
  • JIANJUN MIAO
  • ADRIAN PERALTA‐ALVA
  • MANUEL S. SANTOS

Abstract

In this article, we propose a recursive equilibrium algorithm for the numerical simulation of nonoptimal dynamic economies. This algorithm builds upon a convergent operator over an expanded set of state variables. The fixed point of this operator defines the set of all Markovian equilibria. We study approximation properties of the operator. We also apply our recursive equilibrium algorithm to various models with heterogeneous agents, incomplete financial markets, endogenous and exogenous borrowing constraints, taxes, and money.

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File URL: http://hdl.handle.net/10.1111/iere.2014.55.issue-1
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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 55 (2014)
Issue (Month): (02)
Pages: 83-110

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Handle: RePEc:wly:iecrev:v:55:y:2014:i::p:83-110

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Citations

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Cited by:
  1. Adrian Peralta-Alva & Manuel S. Santos, 2009. "Problems in the numerical simulation of models with heterogeneous agents and economic distortions," Working Papers 2009-036, Federal Reserve Bank of St. Louis.
  2. Felix Kubler & Johannes Brumm, 2013. "Applying Negishi's method to stochastic models with overlapping generations," 2013 Meeting Papers 1352, Society for Economic Dynamics.
  3. Winfried Koeniger & Thomas Hintermaier, 2012. "Collateral constraints and macroeconomic volatility," 2012 Meeting Papers 390, Society for Economic Dynamics.
  4. Adrian Peralta-Alva & Manuel S. Santos, 2012. "Analysis of numerical errors," Working Papers 2012-062, Federal Reserve Bank of St. Louis.
  5. Thomas Mertens, 2012. "Solving General Incomplete Market Models with Substantial Heterogeneity," 2012 Meeting Papers 1173, Society for Economic Dynamics.
  6. Balbus, Łukasz & Reffett, Kevin & Woźny, Łukasz, 2013. "A constructive geometrical approach to the uniqueness of Markov stationary equilibrium in stochastic games of intergenerational altruism," Journal of Economic Dynamics and Control, Elsevier, vol. 37(5), pages 1019-1039.
  7. Jaime McGovern & Olivier Morand & Kevin Reffett, 2013. "Computing minimal state space recursive equilibrium in OLG models with stochastic production," Economic Theory, Springer, vol. 54(3), pages 623-674, November.
  8. Balbus, Łukasz & Reffett, Kevin & Woźny, Łukasz, 2012. "Stationary Markovian equilibrium in altruistic stochastic OLG models with limited commitment," Journal of Mathematical Economics, Elsevier, vol. 48(2), pages 115-132.
  9. Yi Wen & Huabin Wu, 2008. "Dynamics of externalities: a second-order perspective," Working Papers 2008-044, Federal Reserve Bank of St. Louis.
  10. Zhigang Feng, 2013. "Tackling indeterminacy in overlapping generations models," Computational Statistics, Springer, vol. 77(3), pages 445-457, June.
  11. Crettez, Bertrand & Morhaim, Lisa, 2012. "Existence of competitive equilibrium in a non-optimal one-sector economy without conditions on the distorted marginal product of capital," Mathematical Social Sciences, Elsevier, vol. 63(3), pages 197-206.

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