Department of Economics and Business Economics

Numerical solution of dynamic equilibrium models under Poisson uncertainty

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

Standard

Numerical solution of dynamic equilibrium models under Poisson uncertainty. / Posch, Olaf; Trimborn, Timo.

In: Journal of Economic Dynamics and Control, Vol. 37, No. 12, 2013, p. 2602-2622.

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

Harvard

Posch, O & Trimborn, T 2013, 'Numerical solution of dynamic equilibrium models under Poisson uncertainty', Journal of Economic Dynamics and Control, vol. 37, no. 12, pp. 2602-2622. https://doi.org/10.1016/j.jedc.2013.07.001

APA

Posch, O., & Trimborn, T. (2013). Numerical solution of dynamic equilibrium models under Poisson uncertainty. Journal of Economic Dynamics and Control, 37(12), 2602-2622. https://doi.org/10.1016/j.jedc.2013.07.001

CBE

Posch O, Trimborn T. 2013. Numerical solution of dynamic equilibrium models under Poisson uncertainty. Journal of Economic Dynamics and Control. 37(12):2602-2622. https://doi.org/10.1016/j.jedc.2013.07.001

MLA

Posch, Olaf and Timo Trimborn. "Numerical solution of dynamic equilibrium models under Poisson uncertainty". Journal of Economic Dynamics and Control. 2013, 37(12). 2602-2622. https://doi.org/10.1016/j.jedc.2013.07.001

Vancouver

Author

Posch, Olaf ; Trimborn, Timo. / Numerical solution of dynamic equilibrium models under Poisson uncertainty. In: Journal of Economic Dynamics and Control. 2013 ; Vol. 37, No. 12. pp. 2602-2622.

Bibtex

@article{cac4b902a00c44c2bde9bb364e9c9f8a,
title = "Numerical solution of dynamic equilibrium models under Poisson uncertainty",
abstract = "We propose a simple and powerful numerical algorithm to compute the transition process in continuous-time dynamic equilibrium models with rare events. In this paper we transform the dynamic system of stochastic differential equations into a system of functional differential equations of the retarded type. We apply the Waveform Relaxation algorithm, i.e., we provide a guess of the policy function and solve the resulting system of (deterministic) ordinary differential equations by standard techniques. For parametric restrictions, analytical solutions to the stochastic growth model and a novel solution to Lucas' endogenous growth model under Poisson uncertainty are used to compute the exact numerical error. We show how (potential) catastrophic events such as rare natural disasters substantially affect the economic decisions of households.",
keywords = "Continuous-time DSGE, Poisson uncertainty, Waveform Relaxation",
author = "Olaf Posch and Timo Trimborn",
year = "2013",
doi = "10.1016/j.jedc.2013.07.001",
language = "English",
volume = "37",
pages = "2602--2622",
journal = "Journal of Economic Dynamics and Control",
issn = "0165-1889",
publisher = "Elsevier BV",
number = "12",

}

RIS

TY - JOUR

T1 - Numerical solution of dynamic equilibrium models under Poisson uncertainty

AU - Posch, Olaf

AU - Trimborn, Timo

PY - 2013

Y1 - 2013

N2 - We propose a simple and powerful numerical algorithm to compute the transition process in continuous-time dynamic equilibrium models with rare events. In this paper we transform the dynamic system of stochastic differential equations into a system of functional differential equations of the retarded type. We apply the Waveform Relaxation algorithm, i.e., we provide a guess of the policy function and solve the resulting system of (deterministic) ordinary differential equations by standard techniques. For parametric restrictions, analytical solutions to the stochastic growth model and a novel solution to Lucas' endogenous growth model under Poisson uncertainty are used to compute the exact numerical error. We show how (potential) catastrophic events such as rare natural disasters substantially affect the economic decisions of households.

AB - We propose a simple and powerful numerical algorithm to compute the transition process in continuous-time dynamic equilibrium models with rare events. In this paper we transform the dynamic system of stochastic differential equations into a system of functional differential equations of the retarded type. We apply the Waveform Relaxation algorithm, i.e., we provide a guess of the policy function and solve the resulting system of (deterministic) ordinary differential equations by standard techniques. For parametric restrictions, analytical solutions to the stochastic growth model and a novel solution to Lucas' endogenous growth model under Poisson uncertainty are used to compute the exact numerical error. We show how (potential) catastrophic events such as rare natural disasters substantially affect the economic decisions of households.

KW - Continuous-time DSGE

KW - Poisson uncertainty

KW - Waveform Relaxation

U2 - 10.1016/j.jedc.2013.07.001

DO - 10.1016/j.jedc.2013.07.001

M3 - Journal article

VL - 37

SP - 2602

EP - 2622

JO - Journal of Economic Dynamics and Control

JF - Journal of Economic Dynamics and Control

SN - 0165-1889

IS - 12

ER -