Accuracy of numerical solutions using the eulers equation residuals

Manuel S. Santos

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: In this paper we derive sorne asymptotic properties on the accuracy of numerical solutions. We sIlow tIlat the approximation error of the policy function is of the same order of magnitude as the size of the Euler equation residuals. Moreover, for bounding this approximation error tIle most relevant parameters are the discount factor and the curvature of the return function. These findings provide theoretical foundations for the construction of tests that can assess the performance of alternative computational methods.

Keywords: Euler; equation; residuals; value; and; policy; functions; Accuracy (search for similar items in EconPapers)
Date: 1998-07
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:4157

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