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Solving the multi-country real business cycle model using ergodic set methods

  • Kenneth Judd

    ()

    (Hoover Institution)

  • Lilia Maliar

    ()

    (Universidad de Alicante)

  • Serguei Maliar

    (Universidad de Alicante)

We use the stochastic simulation algorithm, described in Judd, Maliar and Maliar (2009), and the cluster-grid algorithm, developed in Judd, Maliar and Maliar (2010a), to solve a collection of multi-country real business cycle models. The following ingredients help us reduce the cost in high-dimensional problems: an endogenous grid enclosing the ergodic set, linear approximation methods, fixed-point iteration and efficient integration methods, such as non-product monomial rules and Monte Carlo integration combined with regression. We show that high accuracy in intratemporal choice is crucial for the overall accuracy of solutions and offer two approaches, precomputation and iteration-on-allocation, that can solve for intratemporal choice both accurately and quickly. We also implement a hybrid solution algorithm that combines the perturbation and accurate intratemporal-choice methods

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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2011-01.pdf
File Function: Fisrt version / Primera version, 2011
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Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2011-01.

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Length: 54 pages
Date of creation: Jan 2011
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2011-01
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  1. Den Haan, Wouter J. & Judd, Kenneth L. & Juillard, Michel, 2011. "Computational suite of models with heterogeneous agents II: Multi-country real business cycle models," Journal of Economic Dynamics and Control, Elsevier, vol. 35(2), pages 175-177, February.
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