Paper #296

Títol:

Parameterized expectations approach; Some practical issues

Autors:

Albert Marcet i Guido Lorenzoni

Data:

Juny 1998

Resum:

We discuss some practical issues related to the use of the Parameterized Expectations Approach (PEA) for solving non-linear stochastic dynamic models with rational expectations. This approach has been applied in models of macroeconomics, financial economics, economic growth, contract theory, etc. It turns out to be a convenient algorithm, especially when there is a large number of state variables and stochastic shocks in the conditional expectations. We discuss some practical issues having to do with the application of the algorithm, and we discuss a Fortran program for implementing the algorithm that is available through the internet. We discuss these issues in a battery of six examples.

Paraules clau:

Numerical algorithm, rational expectations, stochastic difference equations, simulation

Codis JEL:

E10, C60, C63

Àrea de Recerca:

Macroeconomia i Economia Internacional

Publicat a:

Computational Methods for the Study of Dynamic Economies, October 2001, pp. 143-172(30)

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