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Accuracy of simulations for stochastic dynamic models

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Listed author(s):
  • Peralta Alva, Adrián
  • Santos, Manuel S.

Abstract

This paper provides a general framework for the simulation of stochastic dynamic models. Our analysis rests upon a continuity property of invariant distributions and a generalized law of large numbers. We then establish that the simulated moments from numerical approximations converge to their exact values as the approximation errors of the computed solutions converge to zero. These asymptotic results are of further interest in the comparative study of dynamic solutions, model estimation, and derivation of error bounds for the simulated moments.

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File URL: http://e-archivo.uc3m.es/bitstream/handle/10016/297/we034615.pdf?sequence=1
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Paper provided by Universidad Carlos III de Madrid. Departamento de Economía in its series UC3M Working papers. Economics with number we034615.

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Date of creation: Oct 2003
Handle: RePEc:cte:werepe:we034615
Contact details of provider: Web page: http://www.eco.uc3m.es/

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  1. Aruoba, S. Boragan & Fernandez-Villaverde, Jesus & Rubio-Ramirez, Juan F., 2006. "Comparing solution methods for dynamic equilibrium economies," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2477-2508, December.
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  10. Brock, William A. & Mirman, Leonard J., 1972. "Optimal economic growth and uncertainty: The discounted case," Journal of Economic Theory, Elsevier, vol. 4(3), pages 479-513, June.
  11. Krebs, Tom, 2004. "Non-existence of recursive equilibria on compact state spaces when markets are incomplete," Journal of Economic Theory, Elsevier, vol. 115(1), pages 134-150, March.
  12. Lucas, Robert E, Jr, 1980. "Methods and Problems in Business Cycle Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 12(4), pages 696-715, November.
  13. Rabi Bhattacharya & Mukul Majumdar, 2003. "Random dynamical systems: a review," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 23(1), pages 13-38, December.
  14. John Laitner, 1988. "Bequests, Gifts, and Social Security," Review of Economic Studies, Oxford University Press, vol. 55(2), pages 275-299.
  15. Easley, David & Spulber, Daniel F, 1981. "Stochastic Equilibrium and Optimality with Rolling Plans," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(1), pages 79-103, February.
  16. Futia, Carl A, 1982. "Invariant Distributions and the Limiting Behavior of Markovian Economic Models," Econometrica, Econometric Society, vol. 50(2), pages 377-408, March.
  17. Santos, Manuel S., 2002. "On Non-existence of Markov Equilibria in Competitive-Market Economies," Journal of Economic Theory, Elsevier, vol. 105(1), pages 73-98, July.
  18. Manuel S. Santos, 2003. "Estimation by Simulation of Monotone Dynamical Systems," Levine's Working Paper Archive 506439000000000229, David K. Levine.
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