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Numerical simulation of nonoptimal dynamic equilibrium models


Feng, Zhigang; Peralta-Alva, Adrian; Santos, Manuel S (2010). Numerical simulation of nonoptimal dynamic equilibrium models. In: Zurich Center for Computational Financial Economics and North American Winter Meetings of the Econometric Society, Atlanta, Zurich and Atlanta, 5 September 2009 - 5 January 2010.

Abstract

In this paper we present a recursive method for the computation of dynamic competitive equilibria in models with heterogeneous agents and market frictions. This method is based on a convergent operator over an expanded set of state variables. The fixed point of this operator defines the set of all Markovian equilibria. We study approximation properties of the operator as well as the convergence of the moments of simulated sample paths. We apply our numerical algorithm to two growth models, an overlapping generations economy with money, and an asset pricing model with financial frictions.

Abstract

In this paper we present a recursive method for the computation of dynamic competitive equilibria in models with heterogeneous agents and market frictions. This method is based on a convergent operator over an expanded set of state variables. The fixed point of this operator defines the set of all Markovian equilibria. We study approximation properties of the operator as well as the convergence of the moments of simulated sample paths. We apply our numerical algorithm to two growth models, an overlapping generations economy with money, and an asset pricing model with financial frictions.

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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:5 January 2010
Deposited On:04 Feb 2010 23:03
Last Modified:11 Aug 2017 09:28
Publisher DOI:https://doi.org/10.1111/iere.12042

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