A Theory of Pruning

23 Pages Posted: 22 Jul 2014

See all articles by Giovanni Lombardo

Giovanni Lombardo

European Central Bank (ECB)

Harald Uhlig

University of Chicago - Department of Economics

Date Written: July 1, 2014

Abstract

Often, numerical simulations for dynamic, stochastic models in economics are needed. Higher order methods can be attractive, but bear the danger of generating explosive solutions in originally stationary models. Kim-Kim-Schaumburg-Sims (2008) proposed pruning to deal with this challenge for second order approximations. In this paper, we provide a theory of pruning and formulas for pruning of any order. We relate it to results described by Judd (1998) on perturbing dynamical systems.

Keywords: pruning, numerical simulation, numerical economics, Taylor expansion, perturbation methods

JEL Classification: C63, C02, C62

Suggested Citation

Lombardo, Giovanni and Uhlig, Harald, A Theory of Pruning (July 1, 2014). ECB Working Paper No. 1696, Available at SSRN: https://ssrn.com/abstract=2461258

Giovanni Lombardo (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Harald Uhlig

University of Chicago - Department of Economics ( email )

1101 East 58th Street
Chicago, IL 60637
United States

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