Computation of Business Cycle Models: A Comparison of Numerical Methods
AbstractWe compare the numerical methods that are most widely applied in the computation of the standard business cycle model with flexible labor. The numerical techniques imply economically insignificant differences with regard to business cycle summary statistics except for the volatility of investment. Furthermore, these results are robust with regard to the choice of the functional form of the utility function and the model’s parameterization. In conclusion, the simplest and fastest method, the log-linearization of the model around the steady state, is found to be most convenient and appropriate for the standard business cycle model.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1207.
Date of creation: 2004
Date of revision:
log-linearization; projection methods; extended path; value function iteration; parameterized expectations; genetic search;
Other versions of this item:
- Heer, Burkhard & Maußner, Alfred, 2008. "Computation Of Business Cycle Models: A Comparison Of Numerical Methods," Macroeconomic Dynamics, Cambridge University Press, vol. 12(05), pages 641-663, November.
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-07-04 (All new papers)
- NEP-CMP-2004-07-04 (Computational Economics)
- NEP-DGE-2004-07-04 (Dynamic General Equilibrium)
- NEP-MAC-2004-07-04 (Macroeconomics)
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