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Solving the Multi-Country Real Business Cycle Model Using Ergodic Set Methods

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  • Serguei Maliar
  • Lilia Maliar
  • Kenneth L. Judd

Abstract

We use the stochastic simulation algorithm, described in Judd, Maliar and Maliar (2009), and the cluster-grid algorithm, developed in Judd, Maliar and Maliar (2010a), to solve a collection of multi-country real business cycle models. The following ingredients help us reduce the cost in high-dimensional problems: an endogenous grid enclosing the ergodic set, linear approximation methods, fixed-point iteration and efficient integration methods, such as non-product monomial rules and Monte Carlo integration combined with regression. We show that high accuracy in intratemporal choice is crucial for the overall accuracy of solutions and offer two approaches, precomputation and iteration-on-allocation, that can solve for intratemporal choice both accurately and quickly. We also implement a hybrid solution algorithm that combines the perturbation and accurate intratemporal-choice methods.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16304.

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Date of creation: Aug 2010
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Handle: RePEc:nbr:nberwo:16304

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  1. Den Haan, Wouter J. & Judd, Kenneth L. & Juillard, Michel, 2011. "Computational suite of models with heterogeneous agents II: Multi-country real business cycle models," Journal of Economic Dynamics and Control, Elsevier, vol. 35(2), pages 175-177, February.
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Cited by:
  1. Andrei Jirnyi & Vadym Lepetyuk, 2011. "A reinforcement learning approach to solving incomplete market models with aggregate uncertainty," Working Papers. Serie AD 2011-21, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  2. Hubert Janos Kiss & Ismael Rodriguez‐Lara & Alfonso Rosa‐García, 2012. "On the Effects of Deposit Insurance and Observability on Bank Runs: An Experimental Study," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(8), pages 1651-1665, December.
  3. Tom Holden & Michael Paetz, 2012. "Efficient simulation of DSGE models with inequality constraints," School of Economics Discussion Papers 1612, School of Economics, University of Surrey.
  4. Kenneth L. Judd & Lilia Maliar & Serguei Maliar, 2011. "How to Solve Dynamic Stochastic Models Computing Expectations Just Once," NBER Working Papers 17418, National Bureau of Economic Research, Inc.
  5. Ioana Chioveanu & Ugur Akgun, 2011. "Loyalty discounts," Working Papers. Serie AD 2011-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).

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