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A THEORY OF PRUNING
Author(s) -
Lombardo Giovanni,
Uhlig Harald
Publication year - 2018
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12321
Subject(s) - pruning , order (exchange) , computer science , mathematical economics , mathematics , mathematical optimization , economics , finance , agronomy , biology
Abstract Often, numerical simulations for dynamic, stochastic models in economics are needed. Kim et al. ( Journal of Economic Dynamics and Control 32 2008, 3397–414) proposed “pruning” to deal with the challenge of generating explosive paths when employing second‐order approximations. In this article, we provide a theory of pruning and formulas for pruning of any order. Our approach builds on Judd's Numerical Methods in Economics (1998), chapter 13. We provide a comparison to existing methods.