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Taking Perturbation to the Accuracy Frontier: A Hybrid of Local and Global Solutions

Author

Listed:
  • Lilia Maliar

    (Universidad de Alicante, Hoover Institution - Hoover Institution)

  • Serguei Maliar

    (Hoover Institution - Hoover Institution, Dept. of Fundamentos del Analisis Economico - Universidad de Alicante)

  • Sébastien Villemot

    (PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

Local perturbation) methods compute solutions in one point and tend to deliver far lower accuracy levels than global solution methods. We develop a hybrid method that solves for some policy functions locally (using a perturbation method) and that solves for the other policy functions globally (using closed-form expressions and a numerical solver). We applied our hybrid method to solve large-scale RBC models used in the comparison analysis of Kollmann et al. (J Econ Dyn Control 35:186-202, 2011b). We obtain more accurate solutions than those produced by any other (either local or global) solution method participating in that comparison. Our running time is a few seconds.

Suggested Citation

  • Lilia Maliar & Serguei Maliar & Sébastien Villemot, 2012. "Taking Perturbation to the Accuracy Frontier: A Hybrid of Local and Global Solutions," Post-Print hal-00813057, HAL.
    • Handle: RePEc:hal:journl:hal-00813057
    DOI: 10.1007/s10614-012-9342-y
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    Cited by:

    1. Arellano, Cristina & Maliar, Lilia & Maliar, Serguei & Tsyrennikov, Viktor, 2016. "Envelope condition method with an application to default risk models," Journal of Economic Dynamics and Control, Elsevier, vol. 69(C), pages 436-459.
    2. Kenneth L. Judd & Lilia Maliar & Serguei Maliar, 2017. "Lower Bounds on Approximation Errors to Numerical Solutions of Dynamic Economic Models," Econometrica, Econometric Society, vol. 85, pages 991-1012, May.
    3. Fernández-Villaverde, J. & Rubio-Ramírez, J.F. & Schorfheide, F., 2016. "Solution and Estimation Methods for DSGE Models," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 527-724, Elsevier.
    4. Lepetyuk, Vadym & Maliar, Lilia & Maliar, Serguei, 2020. "When the U.S. catches a cold, Canada sneezes: A lower-bound tale told by deep learning," Journal of Economic Dynamics and Control, Elsevier, vol. 117(C).
    5. Hänsel, Matthias, 2024. "Solving the Diamond–Mortensen–Pissarides model: A hybrid perturbation approach," Economics Letters, Elsevier, vol. 236(C).
    6. Balcilar, Mehmet & Gupta, Rangan & Kotzé, Kevin, 2015. "Forecasting macroeconomic data for an emerging market with a nonlinear DSGE model," Economic Modelling, Elsevier, vol. 44(C), pages 215-228.
    7. Vadym Lepetyuk & Lilia Maliar & Serguei Maliar, 2017. "Should Central Banks Worry About Nonlinearities of their Large-Scale Macroeconomic Models?," Staff Working Papers 17-21, Bank of Canada.
    8. Mutschler, Willi, 2018. "Higher-order statistics for DSGE models," Econometrics and Statistics, Elsevier, vol. 6(C), pages 44-56.

    More about this item

    Keywords

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    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • C88 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Other Computer Software
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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