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Numerical Simulation of Nonoptimal Dynamic Equilibrium Models

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Author Info
Zhigang Feng () (Department of Economics, University of Miami)
Jianjun Miao () (Department of Economics, Boston University)
Adrian Peralta-Alva () (Research Division, Federal Reserve Bank of Saint Louis)
Manual Santos () (Department of Economics, University of Miami)

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Abstract

In this paper we present a recursive method for the computation of dynamic competitive equilibria in models with heterogeneous agents and market frictions. This method is based upon a convergent operator over an expanded set of state variables. The ï¬xed point of this operator deï¬nes the set of all Markovian equilibria. We study approximation properties of the operator as well as the convergence of the moments of simulated sample paths. We apply our numerical algorithm to two growth models, an overlapping generations economy with money, and an asset pricing model with financial frictions.

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File URL: http://www.bus.miami.edu/_assets/files/faculty-and-research/academic-departments/eco/eco-working-papers/wp2009-12-numerical-apsfeb28-09.pdf
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Publisher Info
Paper provided by University of Miami, Department of Economics in its series Working Papers with number 0912.

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Length: 49 pages
Date of creation: 28 Feb 2009
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Handle: RePEc:mia:wpaper:0912

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Related research
Keywords: Heterogeneous agents; taxes; externalities; financial frictions; competitive equilibrium; computation; simulation;

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Find related papers by JEL classification:
C6 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming
D5 - Microeconomics - - General Equilibrium and Disequilibrium
E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment

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