A Note on the Accuracy of Extended-Path Solution Methods for Dynamic General Equilibrium Economies
AbstractWe show that the deterministic Extended-Path (EP) method of Fair and Taylor (1983) solves standard dynamic stochastic general equilibrium models with similar accuracy to the best results reported in the literature for alternative methods. The EP method demands more computer time than other methods but has offsetting benefits in terms of simplicity and generality that make it an attractive choice.
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Bibliographic InfoPaper provided by Brock University, Department of Economics in its series Working Papers with number 0801.
Length: 13 pages
Date of creation: Apr 2008
Date of revision: Apr 2008
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Dynamic stochastic equilibrium; computational methods; non-linear solutions;
Find related papers by JEL classification:
- E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-12-14 (All new papers)
- NEP-CBA-2008-12-14 (Central Banking)
- NEP-CMP-2008-12-14 (Computational Economics)
- NEP-DGE-2008-12-14 (Dynamic General Equilibrium)
- NEP-MAC-2008-12-14 (Macroeconomics)
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- S. Boragan Aruoba & Jesus Fernandez-Villaverde & Juan Francisco Rubio-Ramirez, 2003. "Comparing solution methods for dynamic equilibrium economies," Working Paper 2003-27, Federal Reserve Bank of Atlanta.
- S. Boragan Aruoba & Jesus Fernandez-Villaverde & Juan F. Rubio-Ramirez, 2003. "Comparing Solution Methods for Dynamic Equilibrium Economies," PIER Working Paper Archive 04-003, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
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564, Cowles Foundation for Research in Economics, Yale University.
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- Judd, Kenneth L., 1992. "Projection methods for solving aggregate growth models," Journal of Economic Theory, Elsevier, vol. 58(2), pages 410-452, December.
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