Publication: An interior-point algorithm for computing equilibria in economies with incomplete asset markets
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2008-03
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Elsevier
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Abstract
Computing equilibria in general equilibria models with incomplete asset (GEI) markets is technically difficult. The standard numerical methods for computing these equilibria are based on homotopy methods. Despite recent advances in computational economics, much more can be done to enlarge the catalog of techniques for computing GEI equilibria. This paper presents an interior-point algorithm that exploits the special structure of GEI markets. It is proved that, under mild conditions, the algorithm converges globally at a quadratic rate, rendering it particularly effective in solving large-scale GEI economies. To illustrate its performance, relevant examples of GEI markets are solved
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General equilibrium, Incomplete markets, Computation of equilibria, Interior point methods
Bibliographic citation
Journal of Economic Dynamics and Control, 2008, v. 32, n. 3, pp. 677-694