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Accuracy of simulations for stochastic dynamic models

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  • Santos, Manuel S.
  • Peralta Alva, Adrián

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.

Suggested Citation

  • Santos, Manuel S. & Peralta Alva, Adrián, 2003. "Accuracy of simulations for stochastic dynamic models," UC3M Working papers. Economics we034615, Universidad Carlos III de Madrid. Departamento de Economía.
    • Handle: RePEc:cte:werepe:we034615
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