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Local and Nonlocal Comparative Static Analysis of Economic Systems

Author

Listed:
  • Kalaba, Robert E.
  • Tesfatsion, Leigh S.
  • Wang, J.-L.

Abstract

The complete system of ordinary differential equations developed by Kalaba and Tesfatsion (1981) for tracking solution branches of parameterized nonlinear systems is tested using several illustrative examples. One example is the standard Ramsey optimal growth model, for which analytical solutions can be obtained. For this example, the complete system is used to generate solutions c(rho) and k(rho) for the steady-state per-capita levels for consumption and capital as the time preference parameter rho varies from 0 to 0.50. Accuracy to four decimal places is obtained. This represents a stringent test of the method, since the derivative of k(rho) near rho=0 is on the order of -10^2 whereas the derivative of k(rho) near rho=0.50 is on the order of -10^0. Annotated pointers to related work can be accessed here: http://www2.econ.iastate.edu/tesfatsi/nasahome.htm

Suggested Citation

  • Kalaba, Robert E. & Tesfatsion, Leigh S. & Wang, J.-L., 1981. "Local and Nonlocal Comparative Static Analysis of Economic Systems," Staff General Research Papers Archive 11220, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:11220
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    Cited by:

    1. Max E. Jerrell, 1999. "Environments for Global Optimization Using Interval Arithmetic and Computational (Automatic) Differentiation," Computing in Economics and Finance 1999 1321, Society for Computational Economics.

    More about this item

    Keywords

    Comparative statics; solution tracking; ordinary differential equations; parameterized nonlinear systems; optimal growth;
    All these keywords.

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling

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