Numerical Simulation of Nonoptimal Dynamic Equilibrium Models

Federal Reserve Bank of St. Louis Working Paper No. 2011-018B

54 Pages Posted: 15 Apr 2009 Last revised: 2 Jun 2011

See all articles by Zhigang Feng

Zhigang Feng

University of Nebraska at Omaha - Department of Economics

Jianjun Miao

Boston University - Department of Economics

Adrian Peralta-Alva

Federal Reserve Bank of St. Louis

Manuel Santos

University of Miami - School of Business Administration - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: May 31, 2011

Abstract

In this paper we present a recursive method for the numerical simulation of nonoptimal dynamic equilibrium models. This method builds upon a convergent operator over an expanded set of state variables. The fixed point of this operator defines 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 various models with heterogeneous agents, incomplete financial markets, endogenous and exogenous borrowing constraints, taxes, and money.

Keywords: Heterogeneous agents, taxes, externalities, financial frictions, competitive equilibrium, computation, simulation

JEL Classification: C6, D5,E2

Suggested Citation

Feng, Zhigang and Miao, Jianjun and Peralta-Alva, Adrian and Santos, Manuel, Numerical Simulation of Nonoptimal Dynamic Equilibrium Models (May 31, 2011). Federal Reserve Bank of St. Louis Working Paper No. 2011-018B, Available at SSRN: https://ssrn.com/abstract=1380348 or http://dx.doi.org/10.2139/ssrn.1380348

Zhigang Feng

University of Nebraska at Omaha - Department of Economics ( email )

College of Business Administration
60th and Dodge Streets
Omaha, NE 68182
United States

HOME PAGE: http://https://sites.google.com/site/zfeng202/

Jianjun Miao

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States
617-353-6675 (Phone)

HOME PAGE: http://people.bu.edu/miaoj

Adrian Peralta-Alva (Contact Author)

Federal Reserve Bank of St. Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States

HOME PAGE: http://research.stlouisfed.org/econ/peralta-alva/index.html

Manuel Santos

University of Miami - School of Business Administration - Department of Economics ( email )

P.O. Box 248126
Coral Gables, FL 33124-6550
United States

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