Parameterized Expectations Algorithm and the Moving Bounds: a comment on convergence properties
AbstractIn this paper we analyze the convergence properties of the moving bounds algorithm to initialize the Parameterized Expectations Algorithm suggested by Maliar and Maliar (2003) [Journal of Business and Economic Statistics 1, pp. 88-92]. We carry out a Monte Carlo experiment to check its performance against some initialization alternatives based on homotopy principles. We do so within the framework of two standard neoclassical growth models. We show that: (i) speed of convergence is poor as compared to alternatives; (ii) starting from a not very accurate initial guess might prevent convergence in relatively simple models. The results suggest the need to fine tune Maliar and Maliar's method to improve its convergence properties.
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Bibliographic InfoPaper provided by Centro de Estudios Andaluces in its series Economic Working Papers at Centro de Estudios Andaluces with number E2005/12.
Length: 13 pages
Date of creation: 2005
Date of revision:
Nonlinear models; Numerical solution methods; Parameterized Expectations algorithm; Optimal growth;
Find related papers by JEL classification:
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-08-13 (All new papers)
- NEP-CMP-2005-08-13 (Computational Economics)
- NEP-DGE-2005-08-13 (Dynamic General Equilibrium)
- NEP-MAC-2005-08-13 (Macroeconomics)
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