IDEAS home Printed from https://ideas.repec.org/p/ivi/wpasad/2004-40.html
   My bibliography  Save this paper

Parameterized Expectations Algorithm: How To Solve For Labor Easily

Author

Listed:
  • Lilia Maliar

    () (Universidad de Alicante)

  • Serguei Maliar

    (Universidad de Alicante)

Abstract

Euler-equation methods for solving nonlinear dynamic models involve parameterizing some policy functions. We argue that in the typical macroeconomic model with valuable leisure, labor function is particularly convenient for parameterizing. This is because under the labor-function parameterization, the intratemporal first-order condition admits a closed-form solution, while under other parameterizations, there should be a numerical solution. In the context of a simulation-based parameterized expectations algorithm, we find that using the labor-function parameterization instead of the standard consumption-function parameterization reduces computational time by more than a factor of ten.

Suggested Citation

  • Lilia Maliar & Serguei Maliar, 2004. "Parameterized Expectations Algorithm: How To Solve For Labor Easily," Working Papers. Serie AD 2004-40, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:2004-40
    as

    Download full text from publisher

    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2004-40.pdf
    File Function: Fisrt version / Primera version, 2004
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Maliar, Lilia & Maliar, Serguei, 2001. "Heterogeneity in capital and skills in a neoclassical stochastic growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 25(9), pages 1367-1397, September.
    2. den Haan, Wouter J & Marcet, Albert, 1990. "Solving the Stochastic Growth Model by Parameterizing Expectations," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(1), pages 31-34, January.
    3. Christiano, Lawrence J. & Fisher, Jonas D. M., 2000. "Algorithms for solving dynamic models with occasionally binding constraints," Journal of Economic Dynamics and Control, Elsevier, vol. 24(8), pages 1179-1232, July.
    4. Maliar, Lilia & Maliar, Serguei, 2003. "Parameterized Expectations Algorithm and the Moving Bounds," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(1), pages 88-92, January.
    5. Rust, John, 1996. "Numerical dynamic programming in economics," Handbook of Computational Economics,in: H. M. Amman & D. A. Kendrick & J. Rust (ed.), Handbook of Computational Economics, edition 1, volume 1, chapter 14, pages 619-729 Elsevier.
    6. Albert Marcet & Guido Lorenzoni, 1998. "The Parameterized Expectations Approach: Some Practical Issues," QM&RBC Codes 128, Quantitative Macroeconomics & Real Business Cycles.
    7. Coleman, Wilbur John, II, 1990. "Solving the Stochastic Growth Model by Policy-Function Iteration," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(1), pages 27-29, January.
    8. Hans M. Amman & David A. Kendrick, . "Computational Economics," Online economics textbooks, SUNY-Oswego, Department of Economics, number comp1.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kollmann, Robert & Maliar, Serguei & Malin, Benjamin A. & Pichler, Paul, 2011. "Comparison of solutions to the multi-country Real Business Cycle model," Journal of Economic Dynamics and Control, Elsevier, vol. 35(2), pages 186-202, February.
    2. Maliar, Serguei & Maliar, Lilia & Judd, Kenneth, 2011. "Solving the multi-country real business cycle model using ergodic set methods," Journal of Economic Dynamics and Control, Elsevier, vol. 35(2), pages 207-228, February.
    3. Lilia Maliar & Kateryna Garmel & Serguei Maliar, 2005. "The Eu Eastern Enlargement And Fdi: The Implications From A Neoclassical Growth Model," Working Papers. Serie AD 2005-29, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    4. Garmel, Kateryna & Maliar, Lilia & Maliar, Serguei, 2008. "EU eastern enlargement and foreign investment: Implications from a neoclassical growth model," Journal of Comparative Economics, Elsevier, vol. 36(2), pages 307-325, June.
    5. Pérez, Javier J. & Sánchez, A. Jesús, 2009. "Alternatives to initialize the Parameterized Expectations Algorithm," Economics Letters, Elsevier, vol. 102(2), pages 116-118, February.
    6. Hull, Isaiah, 2015. "Approximate dynamic programming with post-decision states as a solution method for dynamic economic models," Journal of Economic Dynamics and Control, Elsevier, vol. 55(C), pages 57-70.

    More about this item

    Keywords

    Nonlinear models; Parameterized expectations; PEA; Monte Carlo simulation; Numerical solution;

    JEL classification:

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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ivi:wpasad:2004-40. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Departamento de Edición). General contact details of provider: http://edirc.repec.org/data/ievages.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.