Faculty of Economics and Business Administration Publications Database
The Gauss–Seidel–quasi-Newton method: A hybrid algorithm for solving dynamic economic models
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Authors: | |
Source: | |
Volume: | 31 |
Number: | 5 |
Pages: | 1610 - 1632 |
Month: | May |
ISSN-Print: |
0165-1889 |
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Online Version |
Year: | 2007 |
Keywords: | OLG models; Gauss–Seidel; Newton–Raphson; Quasi-Newton |
Abstract: | The Jacobi matrix required for second-order iterations, such as standard Newton–Raphson procedures, is often too costly to determine for large systems of non-linear equations of a dynamic economic model. In such circumstances, first-order iterative methods are commonly adopted. The problem then, however, is that baseline first-order iterations may not converge. This paper provides a solution to this problem by developing a hybrid method of first- and second-order iterations for solving large-scale dynamic models. The modified algorithm is robust and fast and relative running times increase with the size and complexity of the economic model. As it is easy to implement – only using standard numerical procedures to augment conventional and intuitive first-order iterations – the algorithm is particularly attractive. |
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