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Precision Performances of Terminal Conditions for Short Time Horizons Forward-Looking Systems

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  • Boucekkine, Raouf
  • Juillard, Michel
  • Malgrange, Pierre

Abstract

In this paper we investigate theoretically the numerical bias due to the truncation of structurally infinite time forward-looking models, by the means of various terminal conditions. On a general multivariate optimal growth model, we first analytically confirm some well-known heuristic properties for certain extreme spectral cases. However, we show that the heuristic findings stated in the literature, relying on intermediate spectral configurations, lack theoretical basis as that they omit, among other relevant features, the crucial role of initial conditions: in this case, comparison criteria exclusively based on spectral considerations lack theoretical sense. Numerical evidence is proposed to illustrate this point and other related empirical findings are presented. Citation Copyright 1997 by Kluwer Academic Publishers.

Suggested Citation

  • Boucekkine, Raouf & Juillard, Michel & Malgrange, Pierre, 1997. "Precision Performances of Terminal Conditions for Short Time Horizons Forward-Looking Systems," Computational Economics, Springer;Society for Computational Economics, vol. 10(2), pages 169-186, May.
    • Handle: RePEc:kap:compec:v:10:y:1997:i:2:p:169-86
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    2. Juillard, Michel, 1996. "Dynare : a program for the resolution and simulation of dynamic models with forward variables through the use of a relaxation algorithm," CEPREMAP Working Papers (Couverture Orange) 9602, CEPREMAP.

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