NUMERICAL SIMULATION OF NONOPTIMAL DYNAMIC EQUILIBRIUM MODELS

Zhigang Feng, Jianjun Miao, Adrian Peralta-Alva, Manuel S. Santos

Research output: Contribution to journalArticle

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Abstract

In this article, we propose a recursive equilibrium algorithm for the numerical simulation of nonoptimal dynamic economies. This algorithm builds upon 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. We also apply our recursive equilibrium algorithm to various models with heterogeneous agents, incomplete financial markets, endogenous and exogenous borrowing constraints, taxes, and money.

Original languageEnglish (US)
Pages (from-to)83-110
Number of pages28
JournalInternational Economic Review
Volume55
Issue number1
DOIs
StatePublished - Feb 1 2014

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ASJC Scopus subject areas

  • Economics and Econometrics

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