Solving the stochastic growth model with a finite element method

Ellen McGrattan

No 164, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: Since it is the dominant paradigm of the business cycle and growth literatures, the stochastic growth model has been used to test the performance of alternative numerical methods. In this paper I apply the finite element method to this model. I show that the method is easy to apply and that, for examples such as the stochastic growth method, it gives accurate solutions within a second or two on a desktop computer. I also show how inequality constraints can be handled by redefining the optimization problem with penalty functions.

Keywords: Econometric; models (search for similar items in EconPapers)
Date: 1993
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Citations: View citations in EconPapers (8)

Published in Journal of Economic Dynamics and Control (Vol 20, Num 1-3, March 1996, pp. 19-42)

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Journal Article: Solving the stochastic growth model with a finite element method (1996)
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