Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/154129 
Year of Publication: 
2014
Series/Report no.: 
ECB Working Paper No. 1696
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
Often, numerical simulations for dynamic, stochastic models in economics are needed. Higher order methods can be attractive, but bear the danger of generating explosive solutions in originally stationary models. Kim-Kim-Schaumburg-Sims (2008) proposed pruning to deal with this challenge for second order approximations. In this paper, we provide a theory of pruning and formulas for pruning of any order. We relate it to results described by Judd (1998) on perturbing dynamical systems.
Subjects: 
numerical economics
numerical simulation
Perturbation Methods
pruning
Taylor expansion
JEL: 
C63
C02
C62
Document Type: 
Working Paper

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