| By: |
Sebastian Rausch;
Thomas F. Rutherford |
| Abstract: |
This paper develops a decomposition algorithm by which a market economy with
many households may be solved through the computation of equilibria for a
sequence of representative agent economies. The paper examines local and
global convergence properties of the sequential recalibration (SR) algorithm.
SR is then demonstrated to efficiently solve Auerbach-Kotlikoff OLG models
with a large number of heterogeneous households. We approximate equilibria in
OLG models by solving a sequence of related Ramsey optimal growth
problems.This approach can provide improvements in both efficiency and
robustness as compared with simultaneous solution-methods. |
| Keywords: |
Computable general equilibrium, overlapping generations, microsimulation, sequential recalibration |
| JEL: |
C68 C81 D61 D91 |
| Date: |
2007–06 |
| URL: |
http://d.repec.org/n?u=RePEc:rwi:repape:0015&r=cmp |