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

Lilia Maliar (1, 2) , Serguei Maliar (2, 3) , Sébastien Villemot (4, 5)

1 Universidad de Alicante
2 Hoover Institution
3 Dept. of Fundamentos del Analisis Economico
4 PSE - Paris-Jourdan Sciences Economiques
5 PSE - Paris School of Economics

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.

Mots clés: Dynare; Perturbation; Hybrid; Accuracy; Numerical methods; Approximation

Domaines: Economies et finances

Lilia Maliar, Serguei Maliar, Sébastien Villemot. Taking Perturbation to the Accuracy Frontier: A Hybrid of Local and Global Solutions. Computational Economics, 2012, ⟨10.1007/s10614-012-9342-y⟩. ⟨hal-00813057⟩