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Local and Nonlocal Comparative Static Analysis of Economic Systems

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Author Info
Kalaba, R.
Tesfatsion, Leigh S.
Wang, J.-L

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Abstract

The complete system of ordinary differential equations developed by Kalaba and Tesfatsion (1981) for tracking solution branches of parameterized nonlinear systems is tested using several illustrative examples. One example is the standard Ramsey optimal growth model, for which analytical solutions can be obtained. For this example, the complete system is used to generate solutions c(rho) and k(rho) for the steady-state per-capita levels for consumption and capital as the time preference parameter rho varies from 0 to 0.50. Accuracy to four decimal places is obtained. This represents a stringent test of the method, since the derivative of k(rho) near rho=0 is on the order of -10^2 whereas the derivative of k(rho) near rho=0.50 is on the order of -10^0. Annotated pointers to related work can be accessed here: http://www.econ.iastate.edu/tesfatsi/nasahome.htm

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Publisher Info
Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 11220.

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Date of creation: 16 Jan 2004
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Publication status: Published in Applied Mathematics and Computation, 1981, Vol. 9, pp. 227-234.
Handle: RePEc:isu:genres:11220

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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Related research
Keywords: Parameterized nonlinear systems; solution tracking; complete differential system; optimal growth model;

Find related papers by JEL classification:
B4 - Schools of Economic Thought and Methodology - - Economic Methodology
C0 - Mathematical and Quantitative Methods - - General
D0 - Microeconomics - - General

Cited by:
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  1. Max E. Jerrell, 1999. "Environments for Global Optimization Using Interval Arithmetic and Computational (Automatic) Differentiation," Computing in Economics and Finance 1999 1321, Society for Computational Economics. [Downloadable!]
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