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Parameterized Expectations Algorithm and the Moving Bounds: a comment on convergence properties

Javier Pérez () and Antonio Jesus Sanchez Fuentes ()

No E2005/12, Economic Working Papers at Centro de Estudios Andaluces from Centro de Estudios Andaluces

Abstract: In this paper we analyze the convergence properties of the moving bounds algorithm to initialize the Parameterized Expectations Algorithm suggested by Maliar and Maliar (2003) [Journal of Business and Economic Statistics 1, pp. 88-92]. We carry out a Monte Carlo experiment to check its performance against some initialization alternatives based on homotopy principles. We do so within the framework of two standard neoclassical growth models. We show that: (i) speed of convergence is poor as compared to alternatives; (ii) starting from a not very accurate initial guess might prevent convergence in relatively simple models. The results suggest the need to fine tune Maliar and Maliar's method to improve its convergence properties.

Keywords: Nonlinear models; Numerical solution methods; Parameterized Expectations algorithm; Optimal growth (search for similar items in EconPapers)
JEL-codes: C63 E17 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2005
New Economics Papers: this item is included in nep-cmp, nep-dge and nep-mac
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