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A smolyak collocation algorithm for an international real business cycle model


Malin, Benjamin; Kubler, Felix; Krüger, Dirk (2008). A smolyak collocation algorithm for an international real business cycle model. In: 14th International Conference on Computing in Economics and Finance (Society for Computational Economics SCE), Paris, 26 June 2008 - 28 June 2008.

Abstract

We describe a sparse grid collocation algorithm to compute recursive solutions of dynamic economies with a sizable number of state variables. We show how powerful this method may be in applications by computing the nonlinear recursive solution of an international real business cycle model with a substantial number of countries, complete insurance markets and frictions that impede frictionless international capital flows. In this economy the aggregate state vector includes the distribution of world capital across different countries as well as the exogenous country-specific technology shocks. We use the algorithm to efficiently solve models with 2, 4, and 6 countries (i.e., up to 12 continuous state variables).

Abstract

We describe a sparse grid collocation algorithm to compute recursive solutions of dynamic economies with a sizable number of state variables. We show how powerful this method may be in applications by computing the nonlinear recursive solution of an international real business cycle model with a substantial number of countries, complete insurance markets and frictions that impede frictionless international capital flows. In this economy the aggregate state vector includes the distribution of world capital across different countries as well as the exogenous country-specific technology shocks. We use the algorithm to efficiently solve models with 2, 4, and 6 countries (i.e., up to 12 continuous state 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:28 June 2008
Deposited On:19 Feb 2009 14:20
Last Modified:05 Apr 2016 13:03
Publisher:Cepremap
Additional Information:Der ungekürzte Titel des Papers lautet: "Computing stochastic dynamic economic models with a large number of state variables: a description and application of a smolyak-collocation method"
Official URL:http://www.cepremap.fr/
Related URLs:http://comp-econ.org/sce_conferences.html

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