Parameterized expectations approach; Some practical issues
AbstractWe discuss some practical issues related to the use of the Parameterized Expectations Approach (PEA) for solving non-linear stochastic dynamic models with rational expectations. This approach has been applied in models of macroeconomics, financial economics, economic growth, contract theory, etc. It turns out to be a convenient algorithm, especially when there is a large number of state variables and stochastic shocks in the conditional expectations. We discuss some practical issues having to do with the application of the algorithm, and we discuss a Fortran program for implementing the algorithm that is available through the internet. We discuss these issues in a battery of six examples.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 296.
Date of creation: Jun 1998
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Numerical algorithm; rational expectations; stochastic difference equations; simulation;
Find related papers by JEL classification:
- E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
- C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
This paper has been announced in the following NEP Reports:
- NEP-ALL-1998-09-14 (All new papers)
- NEP-CMP-1998-10-08 (Computational Economics)
- NEP-DGE-1998-09-14 (Dynamic General Equilibrium)
- NEP-ECM-1998-09-14 (Econometrics)
- NEP-IFN-1998-09-14 (International Finance)
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