Algorithms for solving dynamic models with occasionally binding constraints

@inproceedings{Christiano1994AlgorithmsFS,
  title={Algorithms for solving dynamic models with occasionally binding constraints},
  author={Lawrence J. Christiano and Jonas D. M. Fisher},
  year={1994}
}
We describe several methods for approximating the solution to a model in which inequality constraints occasionally bind, and we compare their performance. We apply the methods to a particular model economy which satisfies two criteria: It is similar to the type of model used in actual research applications, and it is sufficiently simple that we can compute what we presume is virtually the exact solution. We have two results. First, all the algorithms are reasonably accurate. Second, on the… CONTINUE READING

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