Den Haan, Wouter J. 
ORCID: 0000-0001-6214-8156 and De Wind, Joris
(2012)
Nonlinear and stable perturbation-based approximations.
Journal of Economic Dynamics and Control, 36 (10).
pp. 1477-1497.
ISSN 0165-1889
Abstract
Users of regular higher-order perturbation approximations can face two problems: policy functions with odd oscillations and simulated data that explode. We propose a perturbation-based approximation that (i) does not have odd shapes, (ii) generates stable time paths, and (iii) avoids the drawbacks that hamper the pruned perturbation approach of . For models with nontrivial nonlinearities, we find that our alternative and the pruned perturbation approximations give a good qualitative insight in the nonlinear aspects of the true solution, but can differ from the true solution in some quantitative aspects, especially during severe peaks and troughs.
| Item Type: | Article |
|---|---|
| Official URL: | http://www.journals.elsevier.com/journal-of-econom... |
| Additional Information: | © 2012 Elsevier |
| Divisions: | Economics |
| Subjects: | H Social Sciences > HA Statistics H Social Sciences > HC Economic History and Conditions |
| JEL classification: | C - Mathematical and Quantitative Methods > C6 - Mathematical Methods and Programming > C63 - Computational Techniques E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E21 - Macroeconomics: Consumption; Saving; Aggregate Physical and Financial Consumer Wealth |
| Date Deposited: | 26 Jun 2012 08:17 |
| Last Modified: | 12 Dec 2024 00:09 |
| URI: | http://eprints.lse.ac.uk/id/eprint/44468 |
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