Solving the multi-country real business cycle model using a Smolyak-collocation method

Benjamin Malin, Dirk Krueger and Felix Kubler

Journal of Economic Dynamics and Control, 2011, vol. 35, issue 2, 229-239

Abstract: We describe a sparse-grid collocation method to compute recursive solutions of dynamic economies with a sizable number of state variables. We show how powerful this method can be in applications by computing the non-linear 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 up to 10 countries (i.e., up to 20 continuous-valued state variables).

Keywords: Sparse; grids; Collocation; International; real; business; cycles (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (58)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:35:y:2011:i:2:p:229-239

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