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Verifying competitive equilibria in dynamic economies


Kubler, Felix (2008). Verifying competitive equilibria in dynamic economies. In: CRETA (Center for Research in Economic Theory and Application) Summer Conference 2008, Warwick, GB, 1 September 2008 - 4 September 2008.

Abstract

In this paper I derive a sucient condition for a numeri-cally computed -equilibrium of a dynamic stochastic economy with heterogeneous agents to be close to an exact
equilibrium. If the economic fundamentals are semi-algebraic, one can verify computationally whether this condition holds. The condition can be interpreted economically as a robustness requirement on the set of -equilibria that form a neighborhood of the computed approximation.

I use this method of 'self-validating computation' to prove that in realistically calibrated stochastic overlapping generation models, competitive equilibria can often be
extremely well approximated by cubic functions, mapping the current shock and the beginning-of-period wealth-distribution to current endogenous variables.

Abstract

In this paper I derive a sucient condition for a numeri-cally computed -equilibrium of a dynamic stochastic economy with heterogeneous agents to be close to an exact
equilibrium. If the economic fundamentals are semi-algebraic, one can verify computationally whether this condition holds. The condition can be interpreted economically as a robustness requirement on the set of -equilibria that form a neighborhood of the computed approximation.

I use this method of 'self-validating computation' to prove that in realistically calibrated stochastic overlapping generation models, competitive equilibria can often be
extremely well approximated by cubic functions, mapping the current shock and the beginning-of-period wealth-distribution to current endogenous variables.

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Additional indexing

Item Type:Conference or Workshop Item (Paper), not refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Event End Date:4 September 2008
Deposited On:19 Feb 2009 13:47
Last Modified:10 Aug 2017 21:50
Publisher:CRETA
Additional Information:Title of the conference-presentation: Robust equilibria in dynamic economies
Publisher DOI:https://doi.org/10.1093/restud/rdr005
Official URL:http://www2.warwick.ac.uk/fac/soc/economics/news/forums/conferences/creta
Related URLs:http://www2.warwick.ac.uk/fac/soc/economics/research/centres/creta/

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