Liquidity constraints and time non-separable preferences: simulating models with large state spaces
Jerome Adda and
Raouf Boucekkine ()
UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de EconomÃa
Abstract:
This paper presents an alternative method for the stochastic simulation of nonlinear and possibly non-differentiable models with large state spaces. We compare our method to other existing methods, and show that the accuracy is satisfactory. We then use the method to analyze the features of an intertemporal optimizing consumption-saving model, when the utility function is time non-separable and when liquidity constraints are imposed. Two non-separabilities are studied, habit persistence and durability of the commodity. As the model has no closed-form solution, we compute deterministic and stochastic solution paths. It enables us to compare income and consumption volatility, and to describe the density of consumption under the different hypotheses on the utility function.
Keywords: Stochastic; simulations; Liquidity; constraints; Habit; formation; Durability (search for similar items in EconPapers)
Date: 1995-05
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
https://e-archivo.uc3m.es/rest/api/core/bitstreams ... 5c23cfb1f8e4/content (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:3911
Access Statistics for this paper
More papers in UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de EconomÃa
Bibliographic data for series maintained by Ana Poveda ().