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Computation Of Business Cycle Models: A Comparison Of Numerical Methods

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Author Info
Heer, Burkhard
Mau?ner, Alfred

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Abstract

We compare the numerical methods that are most widely applied in the computation of the standard business cycle model with flexible labor. The numerical techniques imply economically insignificant differences with regard to business cycle summary statistics. Furthermore, these results are robust with regard to the choice of the functional form of the utility function and the model's parameterization. In addition, the extended path approach, albeit time-consuming, and the Galerkin projection are found to be the most accurate methods, given that we have not used function approximations beyond the second degree.

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Publisher Info
Article provided by Cambridge University Press in its journal Macroeconomic Dynamics.

Volume (Year): 12 (2008)
Issue (Month): 05 (November)
Pages: 641-663
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Handle: RePEc:cup:macdyn:v:12:y:2008:i:05:p:641-663_07

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Domeij, David & Floden, Martin, 2001. "The labor-supply elasticity and borrowing constraints: Why estimates are biased," Working Paper Series in Economics and Finance 480, Stockholm School of Economics. [Downloadable!]
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  2. Taylor, John B & Uhlig, Harald, 1990. "Solving Nonlinear Stochastic Growth Models: A Comparison of Alternative Solution Methods," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(1), pages 1-17, January.
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  3. Altonji, Joseph G, 1986. "Intertemporal Substitution in Labor Supply: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S176-S215, June. [Downloadable!] (restricted)
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  4. Paul McNelis & John Duffy, 1998. "Approximating and Simulating the Stochastic Growth Model: Parameterized Expectations, Neural Networks, and the Genetic Algorithm," GE, Growth, Math methods 9804004, EconWPA, revised 04 May 1998. [Downloadable!]
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  5. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November. [Downloadable!] (restricted)
  6. Wright, Brian D & Williams, Jeffrey C, 1982. "The Economic Role of Commodity Storage," Economic Journal, Royal Economic Society, vol. 92(367), pages 596-614, September. [Downloadable!] (restricted)
  7. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-17, June. [Downloadable!] (restricted)
  8. Wright, Brian D & Williams, Jeffrey C, 1984. "The Welfare Effects of the Introduction of Storage," The Quarterly Journal of Economics, MIT Press, vol. 99(1), pages 169-92, February. [Downloadable!] (restricted)
  9. Heer, Burkhard & Trede, Mark, 2003. "Efficiency and distribution effects of a revenue-neutral income tax reform," Journal of Macroeconomics, Elsevier, vol. 25(1), pages 87-107, March. [Downloadable!] (restricted)
  10. Judd, K.L., 1992. "Projection Methods for Saving Aggregate Growth Models," Papers e-92-7, Stanford - Hoover Institution.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Paul Pichler, 2005. "Evaluating Approximate Equilibria of Dynamic Economic Models," Vienna Economics Papers 0510, University of Vienna, Department of Economics. [Downloadable!]
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