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Solution of Perfect Foresight Saddlepoint Problems: A Simple Method and Applications

Listed author(s):
  • Martin Brunner


  • Holger Strulik


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    Economists frequently confine themselves to the qualitative analysis of continuous optimization problems or they restrict their quantitative analysis to inaccurate methods like linearization around the steady state. The fact that the solution is characterized by an inherently unstable adjustment path arriving at a boundary value in infinite time, however, does not necessarily imply a complicated solution method. The paper explains and demonstrates the method of backward integration, a recursive solution method that does not only reveal the exact adjustment path but that is also very easy to use.

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    Paper provided by Hamburg University, Department of Economics in its series Quantitative Macroeconomics Working Papers with number 19805.

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    Date of creation: Nov 1998
    Handle: RePEc:ham:qmwops:19805
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