A comparison of numerical methods for the solution of continuous-time DSGE models

Juan Parra-Alvarez

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: This paper evaluates the accuracy of a set of techniques that approximate the solution of continuous-time DSGE models. Using the neoclassical growth model I compare linear-quadratic, perturbation and projection methods. All techniques are applied to the HJB equation and the optimality conditions that define the general equilibrium of the economy. Two cases are studied depending on whether a closed form solution is available. I also analyze how different degrees of non-linearities affect the approximated solution. The results encourage the use of perturbations for reasonable values of the structural parameters of the model and suggest the use of projection methods when a high degree of accuracy is required.

Keywords: Continuous-Time DSGE Models; Linear-Quadratic Approximation; Perturbation Method; Projection Method (search for similar items in EconPapers)
JEL-codes: C63 C68 E32 (search for similar items in EconPapers)
Pages: 35
Date: 2013
New Economics Papers: this item is included in nep-dge, nep-ecm and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: A COMPARISON OF NUMERICAL METHODS FOR THE SOLUTION OF CONTINUOUS-TIME DSGE MODELS (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2013-39

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