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Accuracy Of Simulations For Stochastic Dynamic Models

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  • Manuel S. Santos

    ()

  • Adrian Peralta-Alva

    ()

Abstract

This paper provides a general framework for the simulation of stochastic dynamic models. Our analysis rests upon a continuity property of invariant distributions and a generalized law of large numbers. We then establish that the simulated moments from numerical approximations converge to their exact values as the approximation errors of the computed solutions converge to zero. These asymptotic results are of further interest in the comparative study of dynamic solutions, model estimation, and derivation of error bounds for the simulated moments.

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Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we034615.

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Date of creation: Oct 2003
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Handle: RePEc:cte:werepe:we034615

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  1. Aruoba, S. Boragan & Fernandez-Villaverde, Jesus & Rubio-Ramirez, Juan F., 2006. "Comparing solution methods for dynamic equilibrium economies," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 30(12), pages 2477-2508, December.
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  7. Schenk-Hoppe, Klaus Reiner & Schmalfu[ss], Bjorn, 2001. "Random fixed points in a stochastic Solow growth model," Journal of Mathematical Economics, Elsevier, vol. 36(1), pages 19-30, September.
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  9. Easley, David & Spulber, Daniel F, 1981. "Stochastic Equilibrium and Optimality with Rolling Plans," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(1), pages 79-103, February.
  10. Rabi Bhattacharya & Mukul Majumdar, 2003. "Random dynamical systems: a review," Economic Theory, Springer, Springer, vol. 23(1), pages 13-38, December.
  11. Futia, Carl A, 1982. "Invariant Distributions and the Limiting Behavior of Markovian Economic Models," Econometrica, Econometric Society, Econometric Society, vol. 50(2), pages 377-408, March.
  12. Den Haan, Wouter J & Marcet, Albert, 1994. "Accuracy in Simulations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 61(1), pages 3-17, January.
  13. Lucas, Robert E, Jr, 1980. "Methods and Problems in Business Cycle Theory," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 12(4), pages 696-715, November.
  14. Hopenhayn, Hugo A & Prescott, Edward C, 1992. "Stochastic Monotonicity and Stationary Distributions for Dynamic Economies," Econometrica, Econometric Society, Econometric Society, vol. 60(6), pages 1387-406, November.
  15. D. K. Foley & M. F. Hellwig, 1973. "Asset Management with Trading Uncertainty," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 108, Massachusetts Institute of Technology (MIT), Department of Economics.
  16. Tom Krebs, 2002. "Non-Existence of Recursive Equilibria on Compact State Spaces When Markets are Incomplete," Working Papers 2002-17, Brown University, Department of Economics.
  17. Manuel S. Santos, 2003. "Estimation by Simulation of Monotone Dynamical Systems," Levine's Working Paper Archive 506439000000000229, David K. Levine.
  18. Santos, Manuel S., 2002. "On Non-existence of Markov Equilibria in Competitive-Market Economies," Journal of Economic Theory, Elsevier, Elsevier, vol. 105(1), pages 73-98, July.
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