Accuracy of numerical solutions using the Euler equation residuals

Research output: Contribution to journalArticle

52 Citations (Scopus)

Abstract

This paper is concerned with asymptotic properties on the accuracy of numerical solutions. It is shown that the approximation error of the policy function is of the same order of magnitude as the size of the Euler equation residuals. Moreover, for bounding this approximation error the most relevant parameters are the discount factor and the curvature of the return function. These findings provide theoretical foundations for the construction of tests to assess the performance of alternative computational methods.

Original languageEnglish (US)
Pages (from-to)1377-1402
Number of pages26
JournalEconometrica
Volume68
Issue number6
StatePublished - 2000
Externally publishedYes

Fingerprint

Approximation Error
Euler Equations
Numerical Solution
Discount Factor
Computational Methods
Asymptotic Properties
Curvature
Alternatives
performance
Numerical solution
Euler equations
Approximation error
Policy
Discount factor
Asymptotic properties
Computational methods
Policy function

Keywords

  • Accuracy tests
  • Approximation error
  • Error bounds
  • Euler equations
  • Numerical solutions

ASJC Scopus subject areas

  • Economics and Econometrics
  • Mathematics (miscellaneous)
  • Statistics and Probability
  • Social Sciences (miscellaneous)

Cite this

Accuracy of numerical solutions using the Euler equation residuals. / Santos, Manuel.

In: Econometrica, Vol. 68, No. 6, 2000, p. 1377-1402.

Research output: Contribution to journalArticle

@article{e2ddcc6dcb8740289755c5cac63fb542,
title = "Accuracy of numerical solutions using the Euler equation residuals",
abstract = "This paper is concerned with asymptotic properties on the accuracy of numerical solutions. It is shown that the approximation error of the policy function is of the same order of magnitude as the size of the Euler equation residuals. Moreover, for bounding this approximation error the most relevant parameters are the discount factor and the curvature of the return function. These findings provide theoretical foundations for the construction of tests to assess the performance of alternative computational methods.",
keywords = "Accuracy tests, Approximation error, Error bounds, Euler equations, Numerical solutions",
author = "Manuel Santos",
year = "2000",
language = "English (US)",
volume = "68",
pages = "1377--1402",
journal = "Econometrica",
issn = "0012-9682",
publisher = "Wiley-Blackwell",
number = "6",

}

TY - JOUR

T1 - Accuracy of numerical solutions using the Euler equation residuals

AU - Santos, Manuel

PY - 2000

Y1 - 2000

N2 - This paper is concerned with asymptotic properties on the accuracy of numerical solutions. It is shown that the approximation error of the policy function is of the same order of magnitude as the size of the Euler equation residuals. Moreover, for bounding this approximation error the most relevant parameters are the discount factor and the curvature of the return function. These findings provide theoretical foundations for the construction of tests to assess the performance of alternative computational methods.

AB - This paper is concerned with asymptotic properties on the accuracy of numerical solutions. It is shown that the approximation error of the policy function is of the same order of magnitude as the size of the Euler equation residuals. Moreover, for bounding this approximation error the most relevant parameters are the discount factor and the curvature of the return function. These findings provide theoretical foundations for the construction of tests to assess the performance of alternative computational methods.

KW - Accuracy tests

KW - Approximation error

KW - Error bounds

KW - Euler equations

KW - Numerical solutions

UR - http://www.scopus.com/inward/record.url?scp=0005826243&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=0005826243&partnerID=8YFLogxK

M3 - Article

VL - 68

SP - 1377

EP - 1402

JO - Econometrica

JF - Econometrica

SN - 0012-9682

IS - 6

ER -