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An interior point algorithm for computing equilibria in economies with incomplete asset markets

Mercedes Esteban-Bravo ()

DEE - Working Papers. Business Economics. WB from Universidad Carlos III de Madrid. Departamento de Economía de la Empresa

Abstract: Computing equilibria in general equilibria models with incomplete asset (GEI) markets is technically difficult. The standard numerical methods for computing these equilibria are based on homotopy methods. Despite recent advances in computational economics, much more can be done to enlarge the catalogue of techniques for computing GEI equilibria. This paper presents an interior-point algorithm that exploits the special structure of GEI markets. We prove that the algorithm converges globally at a quadratic rate, rendering it particularly effective in solving large-scale GEI economies. To illustrate its performance, we solve relevant examples of GEI markets

Date: 2004-11
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