Approximating infinite-horizon models in a complementarity format: A primer in dynamic general equilibrium analysis
- 20 November 2001
- journal article
- Published by Elsevier BV in Journal of Economic Dynamics and Control
- Vol. 26 (4), 577-609
- https://doi.org/10.1016/s0165-1889(00)00071-3
Abstract
We demonstrate the advantages of the complementarity formulation for approximating infinite-horizon equilibria in neoclassical growth models as compared with techniques originally developed for optimal planning models. The complementarity approach does not require an ex ante specification of the growth rate in the terminal period and is therefore suitable for models with endogenous growth or short time horizons. We also consider approximation issues in models with multiple infinitely lived agents. Changes in net indebtedness over a finite period are estimated as part of the model to obtain a precise approximation of the infinite-horizon equilibria with a small number of time periods.Keywords
This publication has 3 references indexed in Scilit:
- Applied General Equilibrium Modeling with MPSGE as a GAMS Subsystem: An Overview of the Modeling Framework and SyntaxComputational Economics, 1999
- Extension of GAMS for complementarity problems arising in applied economic analysisJournal of Economic Dynamics and Control, 1995
- Sufficient Conditions for Optimality in an Infinite Horizon Development PlanEconometrica, 1970