Taking Perturbation to the Accuracy Frontier: A Hybrid of Local and Global Solutions

Journal article: Local perturbation) methods compute solutions in one point and tend to deliver far lower accuracy levels than global solution methods. We develop a hybrid method that solves for some policy functions locally (using a perturbation method) and that solves for the other policy functions globally (using closed-form expressions and a numerical solver). We applied our hybrid method to solve large-scale RBC models used in the comparison analysis of Kollmann et al. (J Econ Dyn Control 35:186-202, 2011b). We obtain more accurate solutions than those produced by any other (either local or global) solution method participating in that comparison. Our running time is a few seconds.

Author(s)

Lilia Maliar, Serguei Maliar, Sébastien Villemot

Journal
  • Computational Economics
Date of publication
  • 2012
Keywords
  • Dynare
  • Perturbation
  • Hybrid
  • Accuracy
  • Numerical methods
  • Approximation
Pages
  • nc
Version
  • 1