This paper provides a general framework for the simulation of stochastic dynamic models. Our analysis rests upon a continuity property of invariant distributions and a generalized law of large numbers. We then establish that the simulated moments from numerical approximations converge to their...

In this paper we are concerned with the simulation of non-optimal dynamic economies. The equilibrium laws of motion of these economies cannot be characterized by the methods of dynamic programming and may not be described by continuous policy functions. We prove existence of an invariant...

This paper provides a general framework for the quantitative analysis of stochastic dynamic models. We review convergence properties of some numerical algorithms and available methods to bound approximation errors. We then address convergence and accuracy properties of the simulated moments. Our...

This paper provides a general framework for the quantitative analysis of stochastic dynamic models. We review convergence properties of some numerical algorithms and available methods to bound approximation errors. We then address convergence and accuracy properties of the simulated moments. Our...

This paper provides a general framework for the quantitative analysis of stochastic dynamic models. We review the convergence properties of some numerical algorithms and available methods to bound approximation errors. We then address the convergence and accuracy properties of the simulated...

The market value of U.S. corporations, relative to the replacement cost of their tangible assets, declined by about 50% in 1973-74, and stagnated at that level for the following decade. This collapse in market valuations exactly coincides with the Oil Crisis of October 1973. Over the 1973-78...

Public debt-to-GDP ratios have undergone substantial fluctuations over both the short and long term. Most recently, global debt-to-GDP ratios peaked at 100% on average in 2020 due to COVID-19, retracting substantially by 2022. To understand what drives these movements, we propose a structural...

This paper quantifies the costs of a permanent increase in debt to GDP. We employ a deterministic, overlapping generations model with two assets and no risk of default. The two assets are public debt and private (productive) capital. We assume that the return on private capital equals the...

This paper explores the feasibility of an idea proposed first by the German Council of Economic Experts in 2011 and revisited by Italian and French authorities in 2021: the one-off mutualization of some European legacy debt through the creation of a European Debt Management Agency (EDMA). The...

This paper studies the econometrics of computed dynamic models. Since these models generally lack a closed-form solution, economists approximate the policy functions of the agents in the model with numerical methods. But this implies that, instead of the exact likelihood function, the researcher...