Solving the multi-country real business cycle model using a monomial rule galerkin method

Paul Pichler (1)

1 Department of Economics

I propose a Galerkin projection method for solving dynamic economic models with many state variables. This method employs non-product monomial integration formulas for the computation of weighted residuals, and its computational cost therefore increases only polynomially in the model's dimensionality. I illustrate the practical implementation of the proposed algorithm by solving several specifications of the multi-country Real Business Cycle model described in Den Haan et al. [2010. Computational Suite of Models with Heterogeneous Agents: Multi-country Real Business Cycle Models, , this issue], and briefly discuss two possible routes for further improving its numerical accuracy.

Mots clés: C63; Galerkin method; Weighted residuals; Monomial cubature rules; Curse of dimensionality; Multi-Country Real Business Cycle Model

Domaines: Économie et finance quantitative [q-fin]

Paul Pichler. Solving the multi-country real business cycle model using a monomial rule galerkin method. Journal of Economic Dynamics and Control, 2010, 35 (2), pp.240. ⟨10.1016/j.jedc.2010.09.009⟩. ⟨hal-00765829⟩