Comparing solution methods for dynamic equilibrium economies

Abstract: This paper compares solution methods for dynamic equilibrium economies. We compute and simulate the stochastic neoclassical growth model with leisure choice using ?rst, second, and ?fth order perturbations in levels and in logs, the ?nite elements method, Chebyshev polynomials, and value function iteration for several calibrations. We document the performance of the methods in terms of computing time, implementation complexity, and accuracy, and we present some conclusions based on the reported evidence.

Keywords: Dynamic equilibrium economies; Computational methods; Linear and nonlinear solution methods

Author: S. Boragan Aruoba, Jesus Fernandez-Villaverde, Juan F. Rubio-Ram?rez

16 Aruoba, F-V & R-R 2006.pdf