Accuracy in Simulations

Wouter J. Den Haan and Albert Marcet

The Review of Economic Studies, 1994, vol. 61, issue 1, 3-17

Abstract: Since the actual solution to intertemporal rational expectations models is usually not known, it is useful to have criteria for judging the accuracy of a given numerical solution. In this paper we propose a test for accuracy that is easy to implement and can be applied to a wide class of models without knowledge of the exact solution. We discuss the power of the test by simulating several models with the linear-quadratic approximation and with the method of parameterized expectations. We conclude that the test is powerful.

Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:61:y:1994:i:1:p:3-17.

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