Chapter 12 Computational problems and methods

This chapter discusses some of the important computational methods and problems. The emphasis is on algorithms and general procedures for solving problems. The chapter discusses matrix methods involved in estimating the parameters of single and simultaneous equation models. It discusses various aspects of numerical optimization. These methods become relevant whenever the first-order conditions for a maximum are not linear in the parameters to be estimated. The chapter presents a survey of the typical functions that are optimized and discusses the basic theory of optimization. Special purpose algorithms and simplifications useful in econometrics; and some further aspects of algorithms are discussed. The chapter discusses particular difficulties encountered only in problems of certain types and focuses on numerical integration and random number generation.