Accuracy of simulations for stochastic dynamic models

Manuel S. Santos, Adrian Peralta-Alva

Research output: Contribution to journalArticle

29 Scopus citations

Abstract

This paper is concerned with accuracy properties of simulations of approximate solutions for stochastic dynamic models. Our analysis rests upon a continuity property of invariant distributions and a generalized law of large numbers. We then show that the statistics generated by any sufficiently good numerical approximation are arbitrarily close to the set of expected values of the model's invariant distributions. Also, under a contractivity condition on the dynamics, we establish error bounds. These results are of further interest for the comparative study of stationary solutions and the estimation of structural dynamic models.

Original languageEnglish (US)
Pages (from-to)1939-1976
Number of pages38
JournalEconometrica
Volume73
Issue number6
DOIs
StatePublished - Nov 1 2005
Externally publishedYes

Keywords

  • Approximation error
  • Convergence
  • Invariant distribution
  • Numerical solution
  • Simulated moments
  • Stochastic dynamic model

ASJC Scopus subject areas

  • Economics and Econometrics

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