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A Note on the Time-Elimination Method For Solving Recursive Dynamic Economic Models / Casey B. Mulligan, Xavier Sala-i-Martin.
- Format:
- Book
- Author/Creator:
- Mulligan, Casey B.
- Series:
- Technical Working Paper Series (National Bureau of Economic Research) no. t0116.
- NBER technical working paper series no. t0116
- Language:
- English
- Subjects (All):
- Economic development--Mathematical models.
- Economic development.
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1991.
- Cambridge, Massachusetts : National Bureau of Economic Research, 1991.
- Summary:
- The Time-Elimination Method for solving recursive dynamic economic models is described. By defining control-like and state-like variables, one can transform the equations of motion describing the economy's evolution through time into a system of differential equations that are independent of time. Unlike the transversality conditions, the boundary conditions for the system in the state-like variable are not asymptotic boundary conditions. In theory, this reformulation of the problem greatly facilitates numerical analysis. In practice, problems which were impossible to solve with a popular algorithm - shooting - can be solved in short order. The reader of this paper need not have any knowledge of numerical mathematics or dynamic programming or be able to draw high dimensional phase diagrams. only a familiarity with the first order conditions of the 'Hamiltonian' method for solving dynamic optimization problems is required. The most natural application of Time-Elimination is to growth models. The method is applied here to three growth models.: the Ramsey/Cass/Koopmans one sector model, Jones & Manuelli's(1990) variant of the Ramsey model, and a two sector growth model in the spirit of Lucas (1988). A very simple - but complete - computer program for numerically solving the Ramsey model is provided.
- Notes:
- Print version record
- November 1991.
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