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Terminal conditions in forward-looking economic models

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  • Richard Pierse

    (University of Surrey)

Abstract

In this paper we show how the popular L-B-J algorithm for solving forward-looking economic models using Newton methods can be gen- eralised to allow for a block of terminal equations for variables that appear with a lead. The e¤ect of choosing di¤erent types of termi- nal condition is explored in a simple stochastic growth model using WinSolve, a general nonlinear model solution package.

Suggested Citation

  • Richard Pierse, 2006. "Terminal conditions in forward-looking economic models," School of Economics Discussion Papers 1006, School of Economics, University of Surrey.
    • Handle: RePEc:sur:surrec:1006
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    File URL: https://repec.som.surrey.ac.uk/2006/DP10-06.pdf
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    References listed on IDEAS

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