TAYLOR PROJECTION: A NEW SOLUTION METHOD FOR DYNAMIC GENERAL EQUILIBRIUM MODELS

Oren Levintal

doi:10.1111/iere.12306

TAYLOR PROJECTION: A NEW SOLUTION METHOD FOR DYNAMIC GENERAL EQUILIBRIUM MODELS

Oren Levintal

Reichman University

Research output: Contribution to journal › Article › peer-review

13 Scopus citations

Abstract

This article presents a new solution method for dynamic equilibrium models. The solution is approximated by polynomials that zero the residual function and its derivatives at a given point x₀. The algorithm is essentially a type of projection but is significantly faster, since the problem is highly sparse and can be easily solved by a Newton solver. The obtained solution is accurate locally in the neighborhood of x₀. Importantly, a local solution can be obtained at any point of the state space. This makes it possible to solve models at points that are further away from the steady state.

Original language	English
Pages (from-to)	1345-1373
Number of pages	29
Journal	International Economic Review
Volume	59
Issue number	3
DOIs	https://doi.org/10.1111/iere.12306
State	Published - Aug 2018
Externally published	Yes

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Publisher Copyright:
© (2018) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association

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TAYLOR PROJECTION: A NEW SOLUTION METHOD FOR DYNAMIC GENERAL EQUILIBRIUM MODELS

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