We use perturbation methods to compute optimal policy functions in simple continuous-and discrete-time aggregate growth models. We demonstrate that computing the kth degree Taylor expansion of the policy function arou...
详细信息
We use perturbation methods to compute optimal policy functions in simple continuous-and discrete-time aggregate growth models. We demonstrate that computing the kth degree Taylor expansion of the policy function around the steady state involves solving one quadratic equation and k - 1 linear equations. We also compute Pade expansions, and show that both Taylor and Pade expansions can provide excellent solutions far from the steady state.
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