Accuracy of Deterministic Extended-Path Solution Methods for Dynamic Stochastic Optimization Problems in Macroeconomics
AbstractThe deterministic extended-path method for solving dynamic stochastic optimization problems approximates conditional expectations instead of approximating a model's complex non-linear dynamics. We show that this straightforward approach provides similar accuracy to the best results reported for alternative methods, and gives uniform performance across the entire state space. Our implementation requires roughly 4 fold more computer time than Galerkin projection, but the method has offsetting 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 0907.
Length: 8 pages
Date of creation: Nov 2009
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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-2009-12-05 (All new papers)
- NEP-CBA-2009-12-05 (Central Banking)
- NEP-CMP-2009-12-05 (Computational Economics)
- NEP-DGE-2009-12-05 (Dynamic General Equilibrium)
- NEP-MAC-2009-12-05 (Macroeconomics)
- NEP-ORE-2009-12-05 (Operations Research)
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