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Comparing Solution Methods for Dynamic Equilibrium Economies

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  • S. Boragan Aruoba

    ()
    (Department of Economics, University of Maryland)

  • Jesus Fernandez-Villaverde

    ()
    (Department of Economics, University of Pennsylvania)

  • Juan F. Rubio-Ramirez

    ()
    (Federal Reserve Bank of Atlanta)

Abstract

This paper compares solution methods for dynamic equilibrium economies. We compute and simulate the stochastic neoclassical growth model with leisure choice using Undetermined Coefficients in levels and in logs, Finite Elements, Chebyshev Polynomials, Second and Fifth Order Perturbations and Value Function Iteration for several calibrations. We document the performance of the methods in terms of computing time, implementation complexity and accuracy and we present some conclusions about our preferred approaches based on the reported evidence.

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Bibliographic Info

Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 04-003.

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Length: 76 pages
Date of creation: 23 Nov 2003
Date of revision:
Handle: RePEc:pen:papers:04-003

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Keywords: Dynamic Equilibrium Economies; Computational Methods; Linear and Nonlinear Solution Methods;

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