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Concluding Remarks

In: Macroeconomic Consequences of Demographic Change

Author

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  • Sebastian Rausch

    (Massachusetts Institute of Technology)

Abstract

This book presents a new computational method to efficiently solve large-scale Auerbach-Kotlikoff OLG models that are infeasible for simultaneous solution methods. The proposed decomposition algorithm is based on the solution of a sequence of nonlinear complementarity problems. The main idea is to approximate equilibria of an OLG economy by solving a sequence of representative agent (Ramsey optimal growth) problems. It has been demonstrated that this algorithm can be used to solve high-dimensional OLG models that comprise a large number of sectors and regions and a rich household side, including a large number of heterogeneous households and a variety of household-specific effects. Given the limitations of integrated approaches, the new method thus significantly increases the range of economic questions that can be investigated with these models, providing a valuable addition to the toolbox of applied general equilibrium modelers. One important advantage of the decomposition algorithm presented here is that it facilitates the development of large-scale OLG models designed to investigate in-depth the distributional consequences of economic policy along an intra- and intergenerational dimension.

Suggested Citation

  • Sebastian Rausch, 2009. "Concluding Remarks," Lecture Notes in Economics and Mathematical Systems, in: Macroeconomic Consequences of Demographic Change, chapter 5, pages 125-127, Springer.
    • Handle: RePEc:spr:lnechp:978-3-642-00146-8_5
    DOI: 10.1007/978-3-642-00146-8_5
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