NONLOCAL SOLUTIONS TO DYNAMIC EQUILIBRIUM MODELS: THE APPROXIMATE STABLE MANIFOLDS APPROACH

Viktors Ajevskis ()

Macroeconomic Dynamics, 2019, vol. 23, issue 6, 2544-2571

Abstract: This study presents a method for constructing a sequence of approximate solutions of increasing accuracy to general equilibrium models on nonlocal domains. The method is based on a technique originated from dynamical systems theory. The approximate solutions are constructed employing the Contraction Mapping Theorem and the fact that the solutions to general equilibrium models converge to a steady state. Under certain nonlocal conditions, the convergence of the approximate solutions to the true solution is proved. We also show that the proposed approach can be treated as a rigorous proof of convergence for the extended path algorithm in a class of nonlinear rational expectation models.

Date: 2019
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Related works:
Working Paper: Nonlocal Solutions to Dynamic Equilibrium Models: The Approximate Stable Manifolds Approach (2015)
Working Paper: Non-Local Solutions to Dynamic Equilibrium Models: the Approximate Stable Manifolds Approach (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:23:y:2019:i:06:p:2544-2571_00

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